Politicians Avoid Tax Increases Around Elections

Andrew C. Chang, Linda R. Cohen, Amihai Glazer and Urbashee Paul
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Andrew C. Chang: https://www.federalreserve.gov/econres/andrew-c-chang.htm

No 2021-004, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We use new annual data on gasoline taxes and corporate income taxes from U.S. states to analyze whether politicians avoid tax increases in election years. These data contain 3 useful attributes: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes. Using a pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions. Supplemental analysis supports political salience over legislative e ort in generating this difference in electoral effects.

Keywords: Corporate Income Taxes; Electoral Cycle; Gasoline Taxes; preanalysis plan; Tax Salience (search for similar items in EconPapers)
JEL-codes: D72 D78 H24 H71 K34 P16 (search for similar items in EconPapers)
Pages: 53
Date: 2021-01-29
New Economics Papers: this item is included in nep-law, nep-pbe, nep-pol and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-04

DOI: 10.17016/FEDS.2021.004

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