NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Unequal Geographic Burden of Federal Taxation

David Y. Albouy

NBER Working Paper No. 13995
Issued in May 2008
NBER Program(s):   POL   PE

In the United States, workers in cities offering above-average wages – cities with high productivity, low quality-of-life, or inefficient housing sectors – pay 30 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 17 percent and land and housing prices by 28 and 6 percent, causing locational inefficiencies costing 0.33 percent of income, or $40 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.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w13995

Published: Albouy, David Y. "The Unequal Geographic Burden of Federal Taxation" Journal of Political Economy, vol 117, no. 4, (August 2009) pp. 635-667

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