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The Unequal Geographic Burden of Federal Taxation

  • David Albouy

In the United States, workers in cities offering above-average wages-cities with high productivity, low quality of life, or inefficient housing sectors-pay 27 percent more in federal taxes than otherwise identical workers in cities offering below-average wages. According to simulation results, taxes lower long-run employment levels in high-wage areas by 13 percent and land and housing prices by 21 and 5 percent, causing locational inefficiencies costing 0.23 percent of income, or $28 billion in 2008. Employment is shifted from north to south and from urban to rural areas. Tax deductions index taxes partially to local cost of living, improving locational efficiency. (c) 2009 by The University of Chicago. All rights reserved.

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File URL: http://dx.doi.org/10.1086/605309
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 117 (2009)
Issue (Month): 4 (08)
Pages: 635-667

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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:4:p:635-667
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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