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The Effect of Flat Tax Rates on Taxable Income: Evidence from the Illinois Rate Increase

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  • Thomas Luke Spreen

Abstract

The state of Illinois temporarily increased its flat individual income tax rate from 2011 to 2014. This paper evaluates taxpayer responses following the rate increase and subsequent decrease using a synthetic control matching strategy with data from the American Community Survey. The analysis shows Illinois taxable income declined following the tax increase with significant income retiming in anticipation of the sunset of the elevated rate in 2015. The identified responses were driven by tax units in the top decile of the income distribution.

Suggested Citation

  • Thomas Luke Spreen, 2018. "The Effect of Flat Tax Rates on Taxable Income: Evidence from the Illinois Rate Increase," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(2), pages 231-262, June.
    • Handle: RePEc:ntj:journl:v:71:y:2018:i:2:p:231-262
    DOI: 10.17310/ntj.2018.2.02
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    Cited by:

    1. Gabrielle Pepin, 2022. "The effects of welfare time limits on access to financial resources: Evidence from the 2010s," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1343-1372, April.
    2. Anubhav Gupta & Thomas Luke Spreen, 2024. "Do tax credits benefit charities? Evidence from two states," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 94-109, January.
    3. Augusto Cerqua & Emma Galli, 2020. "Income tax rate increases and heterogeneous taxpayers’ reactions: a spatial regression discontinuity design," Working Papers 17/20, Sapienza University of Rome, DISS.
    4. Rickman, Dan S. & Wang, Hongbo, 2022. "Estimating the Economic Effects of US State and Local Fiscal Policy: A Synthetic Control Method Matched Regression Approach," MPRA Paper 112575, University Library of Munich, Germany.
    5. Rubolino, Enrico, 2019. "The efficiency and distributive effects of local taxes: evidence from Italian municipalities," ISER Working Paper Series 2019-02, Institute for Social and Economic Research.

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