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Tax progressivity and output in the US

Joao Jalles and Georgios Karras

Economics Letters, 2024, vol. 235, issue C

Abstract: Compared to the economic effects of tax rates, those of tax progressivity have benefited much less from the recent Renaissance in fiscal research. In this letter, we use a novel data set on US tax progressivity constructed by Borella et al. (2022) to estimate its output effects since 1970. Our results show that tax progressivity reduces the economy's growth rate temporarily and the level of income per capita permanently. Both effects are sizable, statistically significant, and robust to various specifications and to controlling for changes in the tax rate.

Keywords: Tax progressivity; Tax rates; Economic growth; Time series; Local projections (search for similar items in EconPapers)
JEL-codes: C22 E62 H20 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000296

DOI: 10.1016/j.econlet.2024.111545

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