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The Political Timing of Tax Policy: Evidence from U.S. States

Author

Listed:
  • Chang Andrew C.

    (Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington DC, USA)

  • Cohen Linda R.

    (Department of Economics and School of Law, University of California – Irvine, Irvine, CA, USA)

  • Glazer Amihai

    (Department of Economics, University of California – Irvine, Irvine, CA, USA)

  • Paul Urbashee

    (Department of Economics, Northeastern University, Boston, MA, USA)

Abstract

We examine whether politicians avoid tax increases in election years. Using a pre-analysis plan and new data from U.S. states that distinguish between when taxes are legislated and when they come into force, we find that in an election year enacted gasoline and corporate income tax increases are less likely and implemented tax changes are smaller. We do not find evidence that these election-year effects depend on balanced budget rules, term limits, the state’s liberal-conservative ideological bent, demographics, macroeconomic conditions, or on changes in overall legislative output in election years. These effects are stronger for gasoline taxes, consistent with a legislative response to the high political salience of gasoline taxes.

Suggested Citation

  • Chang Andrew C. & Cohen Linda R. & Glazer Amihai & Paul Urbashee, 2025. "The Political Timing of Tax Policy: Evidence from U.S. States," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 25(3), pages 505-548.
    • Handle: RePEc:bpj:bejeap:v:25:y:2025:i:3:p:505-548:n:1010
    DOI: 10.1515/bejeap-2024-0333
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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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