An exploratory study of the impact of tax freedom on geographic living‐cost differentials

Abstract

AbstractIn the United States, there exist enormous geographic differentials in the cost of living. A sound, basic understanding of factors that influence such geographic living‐cost differentials is important to help formulate useful policies to address various contemporary economic and social problems such as public‐school funding across counties. In this exploratory study of the effects of tax freedom on geographic living‐cost differentials, the following hypothesis is investigated using panel data for the period 2009 through 2020. The higher the average overall freedom from taxation in a state in the forms of personal income taxation, property taxation, and sales taxation, the lower the overall cost of living in the state. In this exploratory study, strong empirical support is obtained for this heretofore effectively overlooked hypothesis.