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Consumption Taxes, Income Taxes, and Revenue Stability: States and the Great Recession

le 22 janvier 2015
Dès 14h

Howard Chernick, professeur d'économie à City University of New York (Etats Unis), Specialist On Public-Sector Economics, animera un séminaire Hotelling à l'ENS Cachan.

Séminaire Hotelling CES - 22 janvier - ENS Cachan

Séminaire Hotelling CES - 22 janvier - ENS Cachan

This paper challenges the conventional wisdom that taxes on consumption are more stable through the business cycle than taxes on personal income, using the Great Recession as a test case.

We first estimate the effect of tax shares from the personal income tax and taxes on consumption on the level and distribution of tax burdens across states, using Citizens for Tax Justice microsimulation estimates for all states.

We find that while both higher income tax shares and higher consumption tax shares are associated with higher average tax burdens, a higher income tax share increases state progressivity, while a higher consumption tax share makes the tax burden more regressive.

We then estimate a regression of tax change on tax burdens and AGI changes by income slice. We find that states with highly unequal income distributions and concentrations of capital gains had more volatile tax bases, but that this volatility did not systematically translate into more volatile tax revenues.

We then use predicted tax burdens from the first stage to simulate the change in state taxes during the Great Recession.
Finally, we simulate the effect of bringing a state's tax structure to national average income and consumption tax shares. Contrary to expectation, we find that states with the greatest reliance on the income tax would have experienced more volatility with a more balanced tax structure, while states with the least reliance would have experienced less volatility.

Though there were a few states with higher income tax shares and greater volatility - e.g., California and New Jersey - some states with no income tax - e.g., Florida and Nevada - suffered the greatest hits from the recession. The conclusion is striking, and important for tax design.

Type :
Séminaires - conférences
Lieu(x) :
Campus de Cachan
Bâtiment Cournot - 5ème étage - salle 513

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