An empirical analysis of state and local tax structure in the context of the Leviathan model of government

Abstract

This paper has investigated the ability of an extreme and relatively simple model of political behavior to explain the level of revenues generated by state and local governments. In general, the behavior of these governments appears to be at least consistent with many of the fiscal outcomes predicted by the Leviathan theory. Several, although not all, of the specific Leviathan theory hypotheses considered received empirical support. The evidence was consistent with the hypothesis that states utilizing comprehensive tax bases, especially a personal income tax, can be expected to generate higher levels of aggregate revenues. Strong support was also observed for the contention that intergovernmental competition by general-purpose substate governments may serve as a substitute for constitutional constraints in limiting the revenue generating power of local governments.