Politicians Avoid Tax Increases Around Elections

RePEc Short ID: pgl23
ORCID iD: 0000-0002-3176-9694

Chang, Andrew C.; Cohen, Linda R.; Glazer, Amihai; Paul, Urbashee

doi:10.17016/FEDS.2021.004

Working Paper

Politicians Avoid Tax Increases Around Elections

Abstract: We use new annual data on gasoline taxes and corporate income taxes from U.S. states to analyze whether politicians avoid tax increases in election years. These data contain 3 useful attributes: (1) when state politicians enact tax laws, (2) when state politicians implement tax laws on consumers and firms, and (3) the size of tax changes. Using a pre-analysis research plan that includes regressions of tax rate changes and tax enactment years on time-to-gubernatorial election year indicators, we find that elections decrease the probability of politicians enacting increases in taxes and reduce the size of implemented tax changes relative to non-election years. We find some evidence that politicians are most likely to enact tax increases right after an election. These election effects are stronger for gasoline taxes than for corporate income taxes and depend on no other political, demographic, or macroeconomic conditions. Supplemental analysis supports political salience over legislative e ort in generating this difference in electoral effects.

Keywords: Corporate Income Taxes; Electoral Cycle; Gasoline Taxes; preanalysis plan; Tax Salience;

JEL Classification: D72; D78; H24; H71; K34; P16;

https://doi.org/10.17016/FEDS.2021.004