Death And Taxes: The Impact Of Progressive Taxation On Health

Anca Cotet ()
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Anca Cotet: Department of Economics, Ball State University

No 200903, Working Papers from Ball State University, Department of Economics

Abstract: More progressive taxes, holding tax liability constant, generate disincentives for health investment by decreasing benefits for additional working time and, thus, decreasing returns to health. On the other hand, progressive taxation may induce individuals to invest more in health for the purpose of extending their working life, because lifetime maximization could imply less work per period but more working years. I identify the effect of progressivity through differences in labor income tax rates among states. I find that the former effect dominates, more progressive taxes are negatively correlated with health, and argue that neither selection effects nor reverse causality can explain this result.

Keywords: Tax Progressivity; Labor Income Tax; Health Investment. (search for similar items in EconPapers)
JEL-codes: D91 H31 I12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2009-03, Revised 2009-03
New Economics Papers: this item is included in nep-hea, nep-lab and nep-pub
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