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The Unequal Geographic Burden of Federal Taxation

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Author Info
David Y. Albouy

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Abstract

In the United States, workers in cities offering above-average nominal 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, federal taxes lower long-run employment levels in high-wage areas by 15 percent and land and housing prices by 25 and 4 percent, leading to locational inefficiencies costing 0.28 percent of income, or $34 billion in 2005. Indexing taxes to local wage-levels eliminates these locational inefficiencies. Tax deductions index taxes partially to local cost-of-living and improve 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, and Regional Economics - - General Regional Economics

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