Do Taxes Increase Economic Inequality? A Comparative Study Based on the State Personal Income Tax

Ugo antonio Troiano

No 24175, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I present new quasi-experimental evidence on the relationship between tax policies and the distribution of income. I focus on the twentieth century United States, and on the personal income tax, since its inception. I study three major policy events that, as the existing literature shows, significantly raised the revenues from the income tax: the introduction of the state personal income tax, the introduction of tax withholding together with third-party reporting, and the intergovernmental agreements between the federal and state governments to coordinate tax auditing efforts. All the three policies were introduced in a staggered fashion and increased tax revenues, but had different fiscal consequences. Despite this, I find that income inequality raised after all the tax policy events. The result is robust to different measures of economic inequality and econometric specifications.

JEL-codes: D63 H23 N32 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: DAE PE POL
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