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On Estimating Marginal Tax Rates For U.S. States

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  • Reed, W. Robert
  • Rogers, Cynthia L
  • Skidmore, Mark

Abstract

This paper presents a procedure for generating state-specific time-varying estimates of marginal tax rates (MTRs). Most estimates of MTRs follow a procedure developed by Koester and Kormendi (1989) (K&K). Unfortunately, the time-invariant nature of the K&K estimates precludes their use as explanatory variables in panel data studies with fixed effects. Furthermore, the associated MTR estimates are not explicitly linked to statutory tax parameters. Our approach addresses both shortcomings. Using comprehensive tax policy data, we estimate state-specific, time-varying MTRs for all 50 states over the years 1977–2004. The inclusion of statutory tax variables has a significant impact on MTR estimates.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 64 (2011)
Issue (Month): 1 (March)
Pages: 59-84

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Handle: RePEc:ntj:journl:v:64:y:2011:i:1:p:59-84

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  1. John Creedy & Norman Gemmell, 2004. "The Income Elasticity of Tax Revenue: Estimates for Income and Consumption Taxes in the United Kingdom," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 55-77, March.
  2. Emmanuel Saez & Joel B. Slemrod & Seth H. Giertz, 2009. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," NBER Working Papers 15012, National Bureau of Economic Research, Inc.
  3. Merriman, David & Skidmore, Mark, 2000. "Did Distortionary Sales Taxation Contribute to the Growth of the Service Sector?," National Tax Journal, National Tax Association, vol. 53(n. 1), pages 125-42, March.
  4. Skidmore, Mark, 1999. " Tax and Expenditure Limitations and the Fiscal Relationships between State and Local Governments," Public Choice, Springer, vol. 99(1-2), pages 77-102, April.
  5. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  6. Easterly, William & Rebelo, Sergio, 1992. "Marginal income tax rates and economic growth in developing countries," Policy Research Working Paper Series 1050, The World Bank.
  7. Feldstein, Martin, 2002. "The Transformation of Public Economics Research: 1970-2000," Scholarly Articles 2797442, Harvard University Department of Economics.
  8. Nichols, Mark W. & Tosun, Mehmet Serkan, 2008. "The Income Elasticity of Gross Casino Revenues: Short–Run and Long–Run Estimates," National Tax Journal, National Tax Association, vol. 61(4), pages 635-52, December.
  9. Padovano, Fabio & Galli, Emma, 2002. "Comparing the growth effects of marginal vs. average tax rates and progressivity," European Journal of Political Economy, Elsevier, vol. 18(3), pages 529-544, September.
  10. Feldstein, Martin, 2002. "The transformation of public economics research: 1970-2000," Journal of Public Economics, Elsevier, vol. 86(3), pages 319-326, December.
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Cited by:
  1. Creedy, John & Gemmell, Norman, 2014. "Measuring Revenue-Maximising Elasticities of Taxable Income: Evidence for the US Income Tax," Working Paper Series 3137, Victoria University of Wellington, Chair in Public Finance.

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