A Tale of Two Tax Jurisdictions:

ABSTRACT California's Proposition 13 and Massachusetts'Proposition 2½ attempted to shrink state and local tax burdens by reducing property taxes and limiting future tax growth. Both initially succeeded. However, following a brief lag, those governments made up lost revenues primarily through increased non-tax fees and charges; within a decade, real per capita revenues and expenditures exceeded their pre-tax revolt peaks. This development is consistent with the hypothesis that voter-initiated limits on a subset of revenue sources, intended to reduce state and local tax burdens, succeed temporarily but are then undermined by expansions in other revenue sources.     

Diversification in local government tax structures

Fiscal problems of local governments, particularly urban centers, have been widespread during recent periods of general economic recession. These problems have resulted from a decline in the growth of revenues and hence an inability to keep pace with rapidly rising expenditures to cover public welfare and inflation. Increased reliance on fast growing but unstable revenues aggravates these problems. It may be possible, however, through proper selection of taxes to diversify away some of the instability in revenue. This paper develops a method to be used in analyzing tax diversification for local governments.     

Estimating the sensitivity of state tax revenue to cyclical and wealth effects

In this study, we estimate the elasticities of alternative sources of state tax revenue relative to the economy, as measured by GSP, and to wealth, as measured by the S&P500. Next, efficient tax frontiers are estimated for each state by minimizing the standard deviation, given the current average growth rate of revenues. It is shown how states could attain the same expected growth rate of tax revenues with less volatility by modifying the composition of their existing tax structures. In most cases, corporate income taxes are found to reduce efficiency due to their high volatility without a correspondingly high growth rate.     

Income taxes and the destination of movers to multistate MSAs

We examine how differences in state income tax rates, as well as other state and local taxes and public service expenditures, influence the choice of state of residence for households (federal tax filers) moving into multistate metropolitan areas (MSAs) using data from the IRS on the migration of taxpayers. MSAs that are on borders provide a spatial discontinuity—discrete differences in state tax rates within a single labor market. These MSAs allow residents to live in one state and work in another state. We find that differences in state income tax rates have a significant impact on the relative rate of migration to the states within an MSA. However, contrary to what would be expected, this impact is only significant in MSAs in which the filing state is based on employment (states without reciprocity) and not for those states in which the filing state is the state of residence (states with reciprocity). In MSAs where states do not have reciprocity agreements, a difference of ten percent in tax rates leads to a 4.1 percent difference in the relative rate of incoming taxpayers. Analogously, we find that a ten percent difference in state tax rates in these MSAs results in a 3.3 percent difference in the rate of tax base inflow (AGI). Our results suggest that one reason that differences in state income taxes appear to have more impact in multistate MSAs without reciprocity is that only relatively large differences in state income tax rates have any impact on migration and these differences are much more pronounced in MSAs without reciprocity.     

The unintended impact of tax and expenditure limitations on the use of special districts: the politics of circumvention

The increasing trend of special districts deserves more attention as it raises concerns on the efficiency and accountability of the fragmented local governance system in America. This paper examines whether the rapid growth of special districts can be partially explained by the expansion of state-imposed tax and expenditure limitations (TELs) during the last several decades. Using panel data from 1972 to 2007, this paper finds that TELs produce unintended circumvention effects among local governments. Specifically, the results reveal TELs motivate local general-purpose governments to create new special districts as an institutional strategy to evade the fiscal constraints imposed by the state.     

Long-run growth and welfare effects of public policies with distortionary taxation

In a one-sector growth model with infrastructure investment, we study the impact of fiscal policies on growth. The government collects taxes on labor income and profits. The government uses these revenues to purchase infrastructure investment, provide utility enhancing government services, and to provide transfer payments to the households. We show that the balanced growth rate is an increasing function of the percent of government revenues that goes to infrastructure. We find that the growth maximizing mix of taxes depends on the elasticity of substitution between inputs. In particular, with distortionary taxes, the growth maximizing tax rate on capital is higher the lower the elasticity of substitution between private physical capital and public capital. In addition, the growth maximizing size of the government is higher when the elasticity of substitution between public and private inputs is low. We also investigate welfare effects of other public expenditures as well. Depending on the elasticity of substitution in production, the welfare implications of different public policies can be substantial.     

Fiscal Policy and Economic Growth

This paper surveys the literature on fiscal policy and economic growth. We present a unifying framework for the analysis of long run growth implications of government expenditures and revenues. We find that several tax rates and expenditure categories exhibit a direct impact on the growth rate of the economy. In a creative synthesis we have assigned the relevant literature to the twelve introduced policy variables. Due to the equivalence of some policy variables we are left with six degrees of freedom, where we need four to internalize the model's intrinsic externalities, leaving two instruments to conduct short run fiscal policy.     

Do Casinos Cause Economic Growth?

A bstract .   Casino gambling is a popular form of entertainment and is purported to have positive effects on host economies. The industry surely affects local labor markets and tax revenues. However, there has been little evidence on the effects of casino gambling on state economic growth. This paper examines that relationship using Granger-causality analysis modified for use with panel data. Our results indicate that there is no Granger-causal relationship between real casino revenues and real per capita income at the state level. The results are based on annual data from 1991 to 2005. These findings contradict an earlier study that found that casino revenues Granger-cause economic growth, using quarterly data from 1991 to 1996. Possible explanations for the differences in short- and long-run effects are discussed.     

Estimating the economic impacts of public spending in a sub-region: an econometric approach.

Expenditures on a public institution represent not only a cost to the taxpayer but an economic benefit to the region in which it is located. The economic impact on a region's income is here calculated through an econometric model and associated multipliers. The impact on government income tax recepits is similarly calculated. The tax revenues are also used in determining the net cost of operation of the institution. These calculations are performed for the expenditures associated with the new State University Hospital at Stony Brook, N.Y. located in the region formed by Nassau and Suffolk Countries. The regional income multiplier is found to be 1.64.     

Estimating cigarette-tax revenue

This paper presents a cigarette-tax revenue model which predicts potential tax revenues. The model is unique in that revenues are estimated in a two-stage process which is invariant to the type of state sales/excise tax regime. The model also controls for cross-state spillover effects. The empirical model was estimated using data from Alabama and surrounding states from 1955 to 1990. The results suggest the demand for cigarettes in Alabama is relatively inelastic; spillover effects are found but are small in scale; and additional revenue potentials can be realized by changes in the tax regime.     

Vertical externalities in cigarette taxation: Do tax revenues go up in smoke?

In federal systems, where tax bases are joint property, the tax policy of one level of government affects the tax base of the other. This paper examines the interdependence of US federal and state cigarette tax rates. Our results suggest that states may reduce their cigarette tax rate by as much as 48 cents per dollar increase in the federal tax rate. Thus, a federal tax hike may reduce the amount of generated state tax revenues both directly (the overall tax rate rises and the state tax base declines), and indirectly (the state tax rate declines).     

Environmental taxes,reforms and economic growth: an empirical analysis of panel data

This paper explores the relationship between environmentally related taxes and the economic growth rate. The analysis also investigates whether this relationship differs between countries that have implemented environmental tax reforms (ETRs) and those that have not. Using panel data from 31 OECD countries over the period 1994–2013, the paper finds that when we allow environmentally related tax revenues to interact with an initial level of real GDP per capita, the overall revenues of these taxes are negatively associated with the economic growth rate in the short and long term. Furthermore, we show that the higher the initial level of GDP per capita, the more environmentally related tax revenues can promote the economic growth rate. The analysis also reveals that the relationship between environmentally related tax revenues and economic growth varies between countries that have a mechanism to redistribute environmentally related tax revenues and those that do not.     

An Alternative Tale of Two Tax Jurisdictions: A Comment

ABSTRACT In a recent issue of this journal, Galles and Sexton (1998) evaluated California's Proposition 13 and Massachusetts' Proposition 2-1/2. Galles and Sexton (1998, p. 123) conclude that
Both initially succeeded. However, following a brief lag… governments made up lost revenues primarily through increased non-tax fees and charges; within a decade, real per capita revenues and expenditures exceeded their pre-revolt peaks.
The present Note offers an alternative view of Propositions 13 and 2-1/2 which, using data from Galles and Sexton (1998, Tables 1, 2), concludes that these Propositions not only yielded short-term success for several years in terms of reduced real per capita revenues and expenditures but also may have yielded longer-term success in terms of reducing the growth rate of real per capita revenues and expenditures. This Note also raises questions about the way in which Galles and Sexton (1998) performed their computations.     

Estimating the economic impact of a minor league baseball stadium

Minor league baseball has enjoyed a renaissance in recent years. In many communities baseball supporters are proposing sports stadiums often with some degree of tax support requiring voter approval. Economic growth and development are issues citizens are asked to consider when they vote. This paper presents an easily adaptable model for estimating the direct and indirect economic impact of a minor league baseball team on the community. An application of the model is featured. Direct expenditures from external sources are estimated and RIMS II regional multipliers are applied to determine the indirect impact on area output, earnings and employment.     

Fiscal impact of privatization revisited: The role of tax revenues in transition economies

In contrast to earlier literature, this paper finds empirical evidence that privatization has deteriorated fiscal balances in transition economies. The investigation focuses on the role of tax revenues in explaining the fiscal impact of privatization, as it appears that tax revenue in many transition countries remained lackluster even after the adoption of several tax reforms in the last two decades, and no formal econometric assessment has been conducted of the extent to which privatization has affected tax revenues. Using panel data for 29 Eastern European and former Soviet Union countries, the analysis finds robust signs of a strong negative impact of privatization on different tax revenue sources. The paper also provides some empirical evidence favoring the early adoption of value-added taxes that appear to have contributed to government revenue recovery.     

Savings and the Budget

The fall in the personal sector savings ratio to a record low last year has been a major factor behind the rapid growth of domestic demand in the past two years and the associated deterioration in the current account. It is also a major uncertainty in the Chancellor's Budget judgement. Existing econometric relationships for the consumption function have failed to predict the fall in personal savings over the past few years. Possible explanations include statistical error, the effects of financial deregulation, the housing boom, expectations of higher growth in incomes, and demographic influences. In this Viewpoint, we report on a new consumption function that successfully explains the decline in savings. It provides evidence of a major demographic influence resulting from the decline in the proportion of the population in the 45–64 age cohort, the main savers in society. Subsidiary effects arise from the boom in house prices, and statistical mis-measurement. The equation predicts an appreciable revival of savings over the next few years as the 45–64 age cohort grows again. These shifts in demographic structure reflect the after-effects of the Second World War. This new evidence suggests that the Chancellor has done quite enough to ensure a slowdown in consumption, and that he would be ill-advised to heed calls for special measures to boost savings. By contrast, well conceived tax changes that remove microeconomic distortions in the tax system (perhaps moving in the direction of an expenditure tax) would improve the tax structure, and may well increase the scope for tax cuts in future budgets. Our new consumption function also lends weight to the Chancellor's argument that the current account deficit is not a source of concern, insofar as it arises from a shift in savings associated with demographic changes that will be reversed in due course.     

Carbon taxes and the double dividend hypothesis in a recursive-dynamic CGE model for Spain

A carbon tax is potentially a policy that can reduce CO₂ emissions and mitigate climate risks, at lowest economy-wide costs. We develop a dynamic CGE model for Spain to assess the economic and environmental effects of a carbon tax, and test the double dividend (DD) hypothesis. We simulate the impact of three carbon taxes: €10, €20 and €30 per ton of CO₂. For each tax, four ‘revenue recycling’ scenarios are examined: a reduction of taxes on capital, on labor, on value-added tax, and a scenario in which revenues are not recycled. We find a DD for taxes of €10/ton and lower, within five to seven years of implementation. We estimate an annual CO₂ emissions reduction of around 10% with this tax. Under some circumstances, the DD can be achieved for a tax of €20/ton. In any case, recycling revenues to cut pre-existing taxes reduces costs of imposing carbon taxes.     

The Revenue Adequacy of Site Value Taxation in a Ricardian System of Economic Growth

A bstract . The federal administration has sought to reduce the growth of federal expenditures by shifting some government costs to state and local governments. An increased expenditure burden for the latter governments would require increased tax rates for existing types of taxes that have adverse impacts on economic incentives. Land taxes are considered as a source of revenue because of their efficiency aspects. Unfortunately this idea is all too often dismissed because of alleged revenue inadequacy. Thus an analysis is called for of the revenue adequacy of site value taxation in a Ricardian model of economic growth. The model allows analysis of revenue adequacy over time in an economic growth context that is suited for the long range tax-expenditure planning horizon with which local governments are faced. When revenue needs are primarily dependent upon the population size, and the fisc is initially operating at a deficit, for a land tax to permit attainment of balance, per capita rents must be increasing over time. Also when the economy's public service demand is primarily dependent upon income, deficits will not occur if rental share exceeds the share of income devoted to public output. Not all income goes to fiscal output, so rent eventually exceeds expenditures.     

完善电子商务活动税收征管的对策探讨

电子商务已在我国得到广泛推广与应用,对此,研究相应的税收征管对策,建立符合电子商务特点的税收制度,不仅有助于保护电子商务用户的合法权益,促进电子商务的正常发展,而且可以使我国分享网络发展资源,减少电子商务相关税收收入的流失而造成的国家财政收入损失,从而保证经济稳健发展。     

The resource curse and income inequality in Iran

This paper has investigated the relationship between oil revenues and inequality in Iran from 1969 to 2012. For this purpose, a threshold regression model has been used for capturing the non-linearity impact of the share of oil revenues in GDP on inequality. Two indicators have been applied for inequality: “Gini coefficient” and “the share of the richest decile of household expenditures which were relative to the poorest decile”. Estimation results of both inequality models suggested that there is a non-linear relationship as a u-shape between “oil revenues/GDP” and inequality in two regimes of oil revenues including high and low oil revenues regimes. The threshold level of oil revenues divided by GDP was about 10% for both inequality models. Before this threshold value, in low oil revenues regime, an increase of oil revenues would decrease income inequality, but after the threshold level and staying in high oil revenues regime, a rise in oil revenues would increase income inequality in Iran.