{"paper_id":"2b95bc2f-963a-446a-a2d5-dbd41beccb15","body_text":"Pass-Through Taxation and Economic Outcomes: Evidence from the Kansas Tax Experiment | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Pass-Through Taxation and Economic Outcomes: Evidence from the Kansas Tax Experiment Shaibu Yahaya This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9250466/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 5 You are reading this latest preprint version Abstract This paper examines the economic effects of the 2012 Kansas tax reform, which sharply reduced individual income tax rates and fully exempted pass-through business income from state taxation. Using a panel of U.S.\\states from 2000 to 2017 and the Synthetic Control Method, I construct a counterfactual Kansas to estimate the reform’s causal impact. The reform generated a large and persistent fiscal shock, with state income tax revenue declining sharply relative to the synthetic control. In contrast, there is no evidence of corresponding improvements in real economic performance. Real gross state product, personal income, and wage and salary employment show no meaningful gains, and sectoral outcomes exhibit no sustained expansion. Measures of pass-through activity, particularly proprietor income, increase relative to the synthetic control, though not statistically distinguishable from placebo variation. Overall, the results are inconsistent with a broad supply-side expansion and instead point to an income reclassification mechanism, whereby income shifts into tax-favored categories without corresponding increases in output, employment, or aggregate income. Pass-through taxation Tax policy income reclassification synthetic control method state taxation economic growth Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Under Review Version 1 posted Reviewers agreed at journal 03 Apr, 2026 Reviewers invited by journal 03 Apr, 2026 Editor assigned by journal 30 Mar, 2026 Submission checks completed at journal 30 Mar, 2026 First submitted to journal 28 Mar, 2026 You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {\"props\":{\"pageProps\":{\"initialData\":{\"identity\":\"rs-9250466\",\"acceptedTermsAndConditions\":true,\"allowDirectSubmit\":false,\"archivedVersions\":[],\"articleType\":\"Research Article\",\"associatedPublications\":[],\"authors\":[{\"id\":617254966,\"identity\":\"c5d1c284-3f37-4188-a403-9bc81147c2ce\",\"order_by\":0,\"name\":\"Shaibu Yahaya\",\"email\":\"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA2klEQVRIiWNgGAWjYJCCD4wNDDwM7A1ApoEFUToYZ4C18BwAaZEgXgsDg0QCiEOEFnPpwwcbf+6wkzG4+fzqhh8FEgz87d0JeLVY9qUlNvOeSeYxuJ1TdrMH6DCJM2c34NVicIbH/DFjGzNIS9oNHqAWA4lcgloMG3+21fMY3DyTdvMPsVoaeNsO8xjcYD92myhbLHvYgH5pO84jeSaH7baMgQQPQb+Y8zADQ6yt2p7v+PFnN9/8sZHjb+8l4DAYQ+EAD5jNg1c5ihb5BvYHBFWPglEwCkbByAQAST9I/2bzasQAAAAASUVORK5CYII=\",\"orcid\":\"\",\"institution\":\"\",\"correspondingAuthor\":true,\"prefix\":\"\",\"firstName\":\"Shaibu\",\"middleName\":\"\",\"lastName\":\"Yahaya\",\"suffix\":\"\"}],\"badges\":[],\"createdAt\":\"2026-03-28 07:09:03\",\"currentVersionCode\":1,\"declarations\":\"\",\"doi\":\"10.21203/rs.3.rs-9250466/v1\",\"doiUrl\":\"https://doi.org/10.21203/rs.3.rs-9250466/v1\",\"draftVersion\":[],\"editorialEvents\":[],\"editorialNote\":\"\",\"failedWorkflow\":false,\"files\":[{\"id\":106724495,\"identity\":\"bad321d3-e636-4b52-bd79-cec538a3c697\",\"added_by\":\"auto\",\"created_at\":\"2026-04-12 18:28:18\",\"extension\":\"pdf\",\"order_by\":1,\"title\":\"\",\"display\":\"\",\"copyAsset\":false,\"role\":\"manuscript-pdf\",\"size\":351311,\"visible\":true,\"origin\":\"\",\"legend\":\"\",\"description\":\"\",\"filename\":\"Kansaspaper1submissiontoITPF.pdf\",\"url\":\"https://assets-eu.researchsquare.com/files/rs-9250466/v1_covered_21733415-018e-49b4-9ef9-f0b2157c3914.pdf\"}],\"financialInterests\":\"No competing interests reported.\",\"formattedTitle\":\"Pass-Through Taxation and Economic Outcomes: Evidence from the Kansas Tax Experiment\",\"fulltext\":[],\"fulltextSource\":\"\",\"fullText\":\"\",\"funders\":[],\"hasAdminPriorityOnWorkflow\":false,\"hasManuscriptDocX\":false,\"hasOptedInToPreprint\":true,\"hasPassedJournalQc\":\"\",\"hasAnyPriority\":false,\"hideJournal\":false,\"highlight\":\"\",\"institution\":\"\",\"isAcceptedByJournal\":false,\"isAuthorSuppliedPdf\":true,\"isDeskRejected\":\"\",\"isHiddenFromSearch\":false,\"isInQc\":false,\"isInWorkflow\":false,\"isPdf\":true,\"isPdfUpToDate\":true,\"isWithdrawnOrRetracted\":false,\"journal\":{\"display\":true,\"email\":\"info@researchsquare.com\",\"identity\":\"international-tax-and-public-finance\",\"isNatureJournal\":false,\"hasQc\":true,\"allowDirectSubmit\":false,\"externalIdentity\":\"itax\",\"sideBox\":\"Learn more about [International Tax and Public Finance](http://link.springer.com/journal/10797)\",\"snPcode\":\"10797\",\"submissionUrl\":\"https://submission.nature.com/new-submission/10797/3\",\"title\":\"International Tax and Public Finance\",\"twitterHandle\":\"\",\"acdcEnabled\":true,\"dfaEnabled\":true,\"editorialSystem\":\"em\",\"reportingPortfolio\":\"Springer Hybrid\",\"inReviewEnabled\":true,\"inReviewRevisionsEnabled\":false},\"keywords\":\"Pass-through taxation, Tax policy, income reclassification, synthetic control method, state taxation, economic growth\",\"lastPublishedDoi\":\"10.21203/rs.3.rs-9250466/v1\",\"lastPublishedDoiUrl\":\"https://doi.org/10.21203/rs.3.rs-9250466/v1\",\"license\":{\"name\":\"CC BY 4.0\",\"url\":\"https://creativecommons.org/licenses/by/4.0/\"},\"manuscriptAbstract\":\"\\u003cp\\u003eThis paper examines the economic effects of the 2012 Kansas tax reform, which sharply reduced individual income tax rates and fully exempted pass-through business income from state taxation. Using a panel of U.S.\\\\states from 2000 to 2017 and the Synthetic Control Method, I construct a counterfactual Kansas to estimate the reform\\u0026rsquo;s causal impact. The reform generated a large and persistent fiscal shock, with state income tax revenue declining sharply relative to the synthetic control. In contrast, there is no evidence of corresponding improvements in real economic performance. Real gross state product, personal income, and wage and salary employment show no meaningful gains, and sectoral outcomes exhibit no sustained expansion. Measures of pass-through activity, particularly proprietor income, increase relative to the synthetic control, though not statistically distinguishable from placebo variation. 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