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What Factors Influence the Structure of the State Income Tax?

Author

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  • Jason M. Fletcher

    (Yale University, New Haven, Connecticut)

  • Matthew N. Murray

    (University of Tennessee, Knoxville)

Abstract

This article contributes to a small body of literature that examines empirically the factors affecting the structure of state income taxes. We assume vote-maximizing politicians who are potentially influenced by information spillovers from other states in the spirit of yardstick competition. A number of nominal provisions of the income tax are considered in the empirical analysis, including earned income tax credits, top bracket rates, exemptions, and income thresholds. Politicians manipulate these and other structural features of the income tax to garner votes. The results yield no evidence of yardstick competition in the setting of income tax policy, regardless of how we define neighbors. Political factors like single-party control affect the choice of some tax provisions. Demographic factors play a mixed role; in particular, characteristics of the low-income population are seldom associated with provisions that benefit these particular groups.

Suggested Citation

  • Jason M. Fletcher & Matthew N. Murray, 2008. "What Factors Influence the Structure of the State Income Tax?," Public Finance Review, , vol. 36(4), pages 475-496, July.
    • Handle: RePEc:sae:pubfin:v:36:y:2008:i:4:p:475-496
    DOI: 10.1177/1091142107303720
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    References listed on IDEAS

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    Cited by:

    1. Leah Platt Boustan & Fernando Ferreira & Hernan Winkler & Eric Zolt, 2010. "Income Inequality and Local Government in the United States, 1970-2000," NBER Working Papers 16299, National Bureau of Economic Research, Inc.
    2. Raúl A. Ponce Rodríguez & Ikuho Kochi & Luis E. Gutiérrez Casas, 2015. "The structure of political power and redistribution in economies with multiple governments," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 30(2), pages 269-303.
    3. Raúl Alberto Ponce Rodríguez, 2018. "Campaign contributions and local public goods in a federation," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(2), pages 283-311.
    4. Suárez-Varela, Marta & Martínez-Espiñeira, Roberto & González-Gómez, Francisco, 2015. "An analysis of the price escalation of non-linear water tariffs for domestic uses in Spain," Utilities Policy, Elsevier, vol. 34(C), pages 82-93.
    5. John M. Foster, 2013. "Voter Ideology, Economic Factors, and State and Local Tax Progressivity," Public Finance Review, , vol. 41(2), pages 177-202, March.
    6. John Deskins & Brian Hill, 2023. "What Factors Entice States to Manipulate Corporate Income Tax Apportionment Formulas?," Public Finance Review, , vol. 51(5), pages 669-687, September.

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