EconPapers    
Economics at your fingertips  
 

The impact of state taxes on pass-through businesses: Evidence from the 2012 Kansas income tax reform

Jason DeBacker (), Bradley Heim, Shanthi Ramnath and Justin Ross

Journal of Public Economics, 2019, vol. 174, issue C, 53-75

Abstract: In 2012, Kansas undertook a large-scale tax reform that excluded pass-through business income from individual taxation. In theory, these changes enhance the incentives to undertake more real economic activity, such as new business formation or expansion of existing businesses. The reform also increased the incentive to avoid taxation by recharacterizing income sources. This paper provides evidence of these effects using federal administrative income tax data spanning 2010–2014. Several findings suggest that, on both the extensive and intensive margins, the pass-through exclusion led to increased tax avoidance in the form of income recharacterization and shifting of effort from activities compensated through wages to those compensated with business income. We do not find much evidence, however, that the Kansas reform led to increases in real economic activity.

Keywords: Taxable income elasticity; Pass-through income; Business taxation; State income taxation; Kansas (search for similar items in EconPapers)
JEL-codes: H24 H71 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272719300386
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:174:y:2019:i:c:p:53-75

DOI: 10.1016/j.jpubeco.2019.03.008

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-31
Handle: RePEc:eee:pubeco:v:174:y:2019:i:c:p:53-75