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The Unequal Geographic Burden of Federal Taxation

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  • David Y. Albouy

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.

Suggested Citation

  • David Y. Albouy, 2008. "The Unequal Geographic Burden of Federal Taxation," NBER Working Papers 13995, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13995
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    More about this item

    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, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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