NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mark Dincecco

Department of Political Science
University of Michigan
5700 Haven Hall
505 S State Street
Ann Arbor MI
48109

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NBER Working Papers and Publications

July 2015Broadening the State: Policy Responses to the Introduction of the Income Tax
with Ugo Troiano: w21373
We present new evidence about a mechanism – the broadening of the tax base – through which governments increase state capacity. Our difference-in-differences identification strategy exploits the staggered introduction of the income tax across twentieth-century US states. We find that tax broadening is associated with 1) a significant increase in total revenues and 2) a significant increase in total government expenditures, and in particular spending on public goods in education and health. We show suggestive evidence that political ideology affects policy responses to the broadening of the tax base.
 
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