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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.

Suggested Citation

  • Reed, W. Robert & Rogers, Cynthia L & Skidmore, Mark, 2011. "On Estimating Marginal Tax Rates for U.S. States," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(1), pages 59-84, March.
    • Handle: RePEc:ntj:journl:v:64:y:2011:i:1:p:59-84
    DOI: 10.17310/ntj.2011.1.03
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    Cited by:

    1. Richard Funderburg & Timothy J. Bartik & Alan H. Peters & Peter S. Fisher, 2013. "The Impact Of Marginal Business Taxes On State Manufacturing," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 557-582, October.
    2. Mark Skidmore & Chad Cotti & James Alm, 2013. "The Political Economy of State Government Subsidy Adoption: The Case of Ethanol," Economics and Politics, Wiley Blackwell, vol. 25(2), pages 162-180, July.
    3. 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.
    4. John D. Merrifield & Barry W. Poulson, 2016. "A Dynamic Scoring Simulation Analysis of How TEL Design Choices Impact Government Expansion," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(2), pages 60-68, April.
    5. Jeffrey Clemens & Stan Veuger, 2020. "Implications of the COVID-19 Pandemic for State Government Tax Revenues," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 619-644, September.
    6. Minniti, Antonio & Venturini, Francesco, 2017. "The long-run growth effects of R&D policy," Research Policy, Elsevier, vol. 46(1), pages 316-326.
    7. Creedy, John & Gemmell, Norman, 2014. "Measuring Revenue-Maximising Elasticities of Taxable Income: Evidence for the US Income Tax," Working Paper Series 18803, Victoria University of Wellington, Chair in Public Finance.
    8. repec:aei:rpaper:1008570714 is not listed on IDEAS
    9. John Merrifield & Barry W. Poulson, 2014. "State Fiscal Policies for Budget Stabilization and Economic Growth: A Dynamic Scoring Analysis," Cato Journal, Cato Journal, Cato Institute, vol. 34(1), pages 47-81, Winter.
    10. J. Sebastian Leguizamon, 2012. "Estimating Implicit Marginal Tax Rates of Welfare Recipients across the US States," Public Finance Review, , vol. 40(3), pages 401-430, May.

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