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State income taxation with mobile labor

  • David E. Wildasin

    (Department of Economics, Indiana University)

The ability of state and local governments to use tax and other fiscal policies to redistribute income may be limited when labor is mobile. An analysis of the allocative and distributional effects of a state income tax shows that, by driving out taxed households, the burden of the tax may be shifted to immobile households and other owners of immobile factors of production and may impose an excess burden on them. The NBER TAXSIM model is used to calculate state income tax burdens for representative high-income households in 1986-1988. Further calculations based on assumed demand elasticities for labor indicate that if high-income households are mobile, the marginal excess burden of income taxes imposed on them may be of substantial size in certain states, especially among the highest income groups.

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File URL: http://hdl.handle.net/10.2307/3325459
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 12 (1993)
Issue (Month): 1 ()
Pages: 51-75

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Handle: RePEc:wly:jpamgt:v:12:y:1993:i:1:p:51-75
Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/34787/home

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  1. Alice M. Rivlin, 1991. "Distinguished Lecture on Economics in Government: Strengthening the Economy by Rethinking the Role of Federal and State Governments," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 3-14, Spring.
  2. Robert J. LaLonde & Robert H. Topel, 1991. "Labor Market Adjustments to Increased Immigration," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 167-199 National Bureau of Economic Research, Inc.
  3. Greenwood, Michael J & McDowell, John M, 1986. "The Factor Market Consequences of U.S. Immigration," Journal of Economic Literature, American Economic Association, vol. 24(4), pages 1738-72, December.
  4. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
  5. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
  6. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  7. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
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