Wednesday, March 13, 2013

Variation of State Income Tax over Time

Interested in seeing not only the geographic trends of state income tax but also if these tax rates had changed over time, I set out to spatially analyze this specific tax.  I knew that there are states that currently have no state income tax but I wasn't sure of their development and if any states that once had no income tax decided to introduce a state income tax or the other way around.  Income tax, because of its visibility, might be less susceptible to changes in its rates because of the perceived political in feasibility and wondered if there were any counterexamples of this dynamic.  Thankfully, I wasn't the first person interested in these quandaries and found a robust source of data regarding the variations of state income tax over time.

TAXSIM is a program that calculates tax liabilities for various state and federal taxes that is offered by the National Bureau of Economic Research.  The datasets are comprised of real tax returns from the past 40 years and calculates the tax liabilities from the source material based on processes similiar to an "H&R Block."  This program contributes a wealth of data to any user interested in tax policy issues and is definitely worth investigating.

The following are map charts that were created using TAXSIM information.  The variable of interest is the marginal tax rate for high income earners and refers to the maximum tax rate for an additional $1000 of income on an initial $1,500,000 of wage income (split evenly between husband and wife).  The taxpayer is also assumed to be married and filing jointly. 

Feel free to comment on any trends or patterns that you notice (such as why Michigan has such an odd shape) as well as any knowledge about a particular state and their reasoning for its change in tax rates.

Sources:  Feenberg, Daniel Richard, and Elizabeth Coutts, An Introduction to the TAXSIM Model, Journal of Policy Analysis and Management vol 12 no 1, Winter 1993, pages 189-194.  (


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