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Tax progressivity and output in the US

Author

Listed:
  • Jalles, João Tovar
  • Karras, Georgios

Abstract

Compared to the economic effects of tax rates, those of tax progressivity have benefited much less from the recent Renaissance in fiscal research. In this letter, we use a novel data set on US tax progressivity constructed by Borella et al. (2022) to estimate its output effects since 1970. Our results show that tax progressivity reduces the economy's growth rate temporarily and the level of income per capita permanently. Both effects are sizable, statistically significant, and robust to various specifications and to controlling for changes in the tax rate.

Suggested Citation

  • Jalles, João Tovar & Karras, Georgios, 2024. "Tax progressivity and output in the US," Economics Letters, Elsevier, vol. 235(C).
    • Handle: RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000296
    DOI: 10.1016/j.econlet.2024.111545
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    More about this item

    Keywords

    Tax progressivity; Tax rates; Economic growth; Time series; Local projections;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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