Getting into the Weeds of Tax Invariance
We provide the first general empirical test of tax invariance (TIV). When a 25 per-cent tax remitted by manufacturers was eliminated in Washington state and the retail cannabis excise tax was simultaneously increased from 25 to 37 percent—a shift in-tended to be revenue-neutral—TIV did not hold. Manufacturers kept two-thirds of their tax savings instead of passing all their savings through to retail firms via lower prices as predicted by TIV. One-third of the retail tax increase was passed on to consumers via higher retail prices – TIV would have predicted constant or even declining tax-inclusive retail prices.
-
-
Copy CitationBenjamin Hansen, Keaton Miller, and Caroline Weber, "Getting into the Weeds of Tax Invariance," NBER Working Paper 23632 (2017), https://doi.org/10.3386/w23632.
-
-
Related
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
