The Impact of Direct Taxes on the Cost of Living
AbstractIn this paper, the authors define a cost-of-living index including direct taxes. They show its relationship to the traditional index and demonstrate how nonconsumption costs are properly treated. They t hen define a fixed-weight approximation, a tax and price index (TPI). Using federal, state, local, and social security tax rates for 1967- 85, the authors construct annual TPI series based on household data. They find that inclusion of direct taxes has sizable impacts on the e stimated rate of inflation. Partitioning their household sample, they find that recognition of taxes significantly alters inflation rate d ifferentials estimated using consumption prices alone. Copyright 1987 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 95 (1987)
Issue (Month): 4 (August)
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- Louis Kaplow, 1997. "Regional Cost-of-Living Adjustments in Tax-Transfer Schemes," NBER Working Papers 5008, National Bureau of Economic Research, Inc.
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