Is State Tax Policy Associated With State-Level COVID-19 Restrictions?

Abstract

During the COVID-19 pandemic, states imposed restrictions intended to slow the spread of the virus. We investigate whether states' reliance on consumption tax revenue, relative to other tax revenue sources, is associated with the duration of COVID-19 mobility restrictions. We find that states that are more dependent on consumption taxes experienced shorter durations of stay-at-home orders, restaurant closures, and bar closures. We conduct a series of analyses to mitigate concerns that state-level political preferences and biases may be influencing our findings. Our findings suggest that anticipated shortfalls in consumption tax revenue may have shaped public health responses, consistent with tax system structures relating, unintentionally, to crisis management decisions.