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Abstract

In the United States, workers in cities offering above-average wages – cities with high productivity, low quality-of-life, or inefficient housing sectors – pay 30 percent more in federal taxes than otherwise identical workers in cities offering below-average wages. According to simulation results, taxes lower long-run employment levels in high-wage areas by 17 percent and land and housing prices by 28 and 6 percent, causing locational inefficiencies costing 0.33 percent of income, or $40 billion in 2008. Employment is shifted from North to South and from urban to rural areas. Tax deductions index taxes partially to local cost-of-living, improving locational efficiency.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13995.

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Date of creation: May 2008
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Handle: RePEc:nbr:nberwo:13995

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Find related papers by JEL classification:

• H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
• H5 - Public Economics - - National Government Expenditures and Related Policies
• H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
• J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
• R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

This paper has been announced in the following NEP Reports:

• NEP-ALL-2008-05-17 (All new papers)
• NEP-GEO-2008-05-17 (Economic Geography)
• NEP-LAB-2008-05-17 (Labour Economics)
• NEP-PBE-2008-05-17 (Public Economics)
• NEP-PUB-2008-05-17 (Public Finance)
• NEP-URE-2008-05-17 (Urban & Real Estate Economics)

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1. Federal income tax is the enemy of urbanism
   by Noah in Noahpinion on 2011-11-25 22:29:00

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