Sales Tax Rates Research Articles

SUBSIDY AND TUITION POLICIES IN PUBLIC HIGHER EDUCATION

I. INTRODUCTION The much discussed and widely debated recent conditions in public higher education include expanding enrollments, flat if not declining public appropriations per resident student, and rapid increases in tuition rates. (1) To many observers, tuition policy in public higher education appears be explained as an attempt to set tuition at whatever level is necessary to compensate for shortfalls between public appropriations and instructional expenditures. Ehrenberg (2006) asserts that public higher education has been buffeted by a perfect storm, in which state appropriations to public higher education institutions have failed to keep pace with per student expenditures in private higher education because of economic recession, the priorities placed on alternative uses of state tax revenues (such as elementary and secondary education, Medicaid, welfare, and criminal justice), and efforts to reduce income and sales tax rates. A considerable empirical literature examines the relationship between tuition in public higher education and state appropriations. Koshal and Koshal (2000) identify a negative relationship between tuition and state appropriation. A study of college costs and prices, which is conducted by Cunningham et al. (2001), identifies an inverse association between tuition rates and annual budget appropriations but finds little evidence of a link between tuition and expenditures on instruction. Lowry (2001) treats state appropriations as exogenous in a resident tuition equation and discovers a significant negative relationship between state funding and tuition. Rizzo (2005) finds that increases in tuition are linked to declines in future levels of state funding, which hints at a dynamic association. Rizzo and Ehrenberg (2004), in one of the more extensive examination of the topic, treat real state appropriations per student as an exogenous variable in their resident tuition equation and find that schools that receive higher state appropriations per student charge lower tuition, though the elasticity is far from unity. Acknowledging the economic and demographic conditions of public higher education and the empirical literature linking appropriations and tuition raises a number of questions. What activities are legislatures supporting when they allocate public funds to higher education? What are the implied responsibilities for subsidizing residents versus nonresidents? How are resident and nonresident tuition rates determined, and what are the relationships among tuition rates, resident and nonresident enrollments, and state appropriations to higher education? In particular, there appears to be the need to develop a better understanding of the decision processes that determine both the public subsidy and the setting of tuition rates. A goal of this article is to develop a conceptual framework for that process. There is a widely held notion that residents should pay a lower tuition than nonresidents, and as a result of a resident subsidy, they do so in nearly all public universities. One rationale for favorable treatment is that residents and their parents pay state taxes. Another claim, which receives some support by Groen (2004), is that residents are likely to remain in the state after graduation and thus contribute future tax revenues. Although the public subsidy to higher education is justified for these, and many other economic-development reasons, some argue that the higher education subsidy is simply a payoff to special interest groups who influence legislatures and governors. Friedman (1968) and Goldin and Katz (1998) provide a general discussion of the objectives of subsidized higher education. For whatever reasons, resident students continue to receive a substantial publicfinanced subsidy, while nonresidents pay close to full cost. There are two basic arrangements for determining tuition rates in higher education: (1) institutions determine tuition rates under the direction of an independent governing board; and (2) state legislatures, who are governed by statues and budget policies, make tuition decisions. …

The GST Cut and Fiscal Imbalance

The federal government is reducing its GST rate from 7% to 5%. We examine a broader reform in which this reduction in federal tax rates and revenues is accompanied by a similar reduction in federal transfers to the provinces. At the same time, the provinces may if they wish increase their own sales tax rates to make up the difference, while some provinces, including Ontario, reform their retail sales taxes to emulate the federal GST more closely. We analyze the likely impacts of such reforms on provincial revenues, tax incidence, and business investment. The result of combining these measures would be (1) a better 'balanced' federation, with less room for 'blame-shifting' between levels of government and consequently greater accountability at all levels, and (2) owing to the removal of the present surprisingly heavy tax on investment imposed by the provincial retail sales taxes an expansion in investment and, over time, in productivity, employment, and perhaps economic growth.

Internet Retail Demand: Taxes, Geography, and Online-Offline Competition

Data on sales of memory modules are used to explore several aspects of e-retail demand. There is a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from online retailers. This suggests that there is substantial substitution between online and online retail, and tax avoidance may be an important contributor to e-retail activity. Geography matters in two ways: we find some evidence that consumers prefer purchasing from firms in nearby states to benefit from faster shipping times as well as evidence of a separate preference for buying from in-state firms. Consumers appear fairly rational in some ways, but boundedly rational in others.

Motivations, Obstacles, and Resources: The Adoption Of The General-Purpose Local Option Sales Tax in Georgia Counties

Local governments in Georgia have been authorized since the 1970s to levy a 1 percent general-purpose Local Option Sales Tax (LOST), which is earmarked for property tax relief. Using data during 1975 to 2002, this study examines the adoption of the LOST through a discrete-time event history analysis. The dependent variable is the probability that an eligible county will adopt it in a particular year. This probability is negatively related to the obstacles prohibiting the innovation and positively related to (1) the motivations to innovate and (2) the resources for overcoming the obstacles. The findings suggest that the motivations are higher in counties with higher property tax millage rates and the potential of sales tax exportation; the obstacles include high existing sales tax rates and severe tax competition; and the major resource for overcoming these obstacles is the adoption of the LOST in other Georgia counties.

Assessing Indirect Tax Reform in a Tourism-Dependent Developing Country

Summary The paper investigates the effects of reform of the current structure of indirect taxes in Mauritius, a relatively tourism-dependent economy. It uses a computable general equilibrium model to explore the relative efficiency of changing sales tax rates on tourism and nontourism related sectors, and allowing for equity considerations. The efficiency of tax reforms are also distinguished for cases where tourist arrivals are exogenously set, and where they endogenously adjust to changes in relative prices. The simulation results show that the tourism sectors are currently undertaxed. Additionally, taxing tourism sectors is found to be the most socially efficient means of raising tax revenue.

Sales Taxes and the Decision to Purchase Online

Current tax treatment of online business-to-consumer transactions may be one of the factors behind rapidly growing e-commerce. In this article, the authors examine the impact of state sales taxes on the consumer decision to conduct shopping online, using comprehensive data representative of the U.S. population. The estimation results demonstrate that there exists a direct relationship between the state sales tax rate and consumer participation in e-commerce. However, although statistically significant, this effect is relatively small. The estimates indicate that a 1 percent increase in the tax price leads to only a 0.5 percent decline in the probability of participation in online commerce.

Regional Taxation and Retailing: The Economic Geography of the Internet

It is well established in the economics literature that before-tax prices are not independent of sales-tax rates. This paper shows that a sales-tax imposed in a high tax region can decrease the tax-included price for a buyer in a low tax region who purchases from a seller in the high tax region. Therefore, it may be more profitable for Internet retailers to be located in high tax regions. An empirical analysis shows that automobile manufacturers in the European Union (EU) set higher before-tax recommended prices for countries with low indirect taxes. This may contribute to the explanation of the flow of Internet automobile sales from high tax countries to low tax countries in the EU.

The Impact of the US Sales Tax Rate on City Size and Economic Activity: A CGE Approach

This paper analyses the effects of the change in the US sales tax on economic activity and city size using a computable general equilibrium (CGE) model. Previous works have been designed to isolate the effects of a sales tax change on the particular parameters, such as city size, non-central retail activity and the value of housing. This research summarises the effects of a change in the sales tax rate on all the relevant variables in the context of one model. The underlined theoretical foundation is tested using data collected for the city of Fort Collins, a jurisdiction of approximately 100 000 people in northern Colorado, USA.

Local Sales Tax Competition and the Effect on County Governments' Tax Rates and Tax Bases

Local governments can try to attract retail sales by keeping sales tax rates low and encouraging residents of other jurisdictions to cross-border shop. This predatory behavior must be balanced against the governments' desire to raise revenues. This study examines the extent to which local governments compete and attempt to limit cross-border shopping by changing sales tax rates. I estimate two equations, local sales tax rate and local sales tax base, in the short and long run. The local sales tax rate equation represents the county's tax policy choices and the sales tax base equation represents the demand function for the county businesses' taxable goods and services. The regression results show local governments do consider the sales tax rates of neighboring counties in setting their own rates in both the short and long run. The study also provides evidence that the sales tax rates of the home and competing counties will affect the sales tax base of the home county because shoppers will cross borders to take advantage of differences in tax rates between counties.

Sales Tax Policy Interaction Among the State Governments in India

Although various theoretical as well as empirical studies have emerged to analyze the interjurisdictional tax competition, most of them concern developed nations. This study analyzes the sales tax choice interaction among the State governments in India during 1990–91 to 1998–99. In the first exercise, it uses the effective sales tax rate for 16 States and the Union Territory of Pondicherry and in the second, it uses the actual rates for ten selected commodities in Southern States. In both cases, tax reaction functions are specified and estimated using the panel data methodologies. The results provide strong evidence for the existence of interstate competition in choosing the actual/effective sales tax rates during the study period. The results favor for region and commodity specific tax coordination policies.

Tax Interdependence in American States

State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes are used to compensate for sales tax fluctuations within the U.S. states. The results show that one percent increase in the sales tax rate is associated with a half and a third percent decrease in the personal and corporate income tax rates respectively. In terms of tax revenues per capita, the results show that a one percent increase in the sales tax revenue per capita is associated with a 3 percent and 0.9 percent decreased in the corporate and personal income tax revenue per capita respectively.

Voting Outcomes of Local Tax Ballot Measures with a Substantial Rail Transit Component: Case Study of Effects of Transportation Packages

This research explores the effect of transportation package characteristics, both qualitative and quantitative, on the outcome of tax ballot measures with a substantial rail transit component. Seventeen recent ballot measures, each occurring in 1995 or later, in 12 communities are examined with information generated through on-site and telephone interviews and written documentation. Key findings suggest that ( a) failed campaigns may successfully be repeated with appropriate adjustments; ( b) multimodal packages tend to be more readily approved by voters; ( c) providing perceived geographic equity is both important and challenging, with one feasible approach involving decentralized planning; ( d) involving influential representatives from the business community, environmental groups, and the political community in the planning process is important in building an effective supporting coalition, although developing a package acceptable to all these groups can be difficult, and ( e) voters appear to be more sensitive to the tax expiration date than to the sales tax rate.

E-Commerce in the Context of Declining State Sales Tax Bases

This paper extends the quantitative estimates of sales tax revenue losses from electronic commerce in a variety of ways. First, we place the effects of e—commerce in the context of general sales tax base trends, arguing that e—commerce is only one of the factors reducing sales tax bases. Second, we take a forward looking view, estimating both the current losses and the expected losses several years hence. Third, we estimate the revenue—neutral increases in state sales tax rates that will become necessary to offset the base declines. Revenue loss estimates are prepared for every state with a sales tax. Our baseline estimates suggest that e—commerce will cause about $10.8 billion in additional tax revenue losses nationwide in 2003.

Urban Malls, Tax Base Migration, and State Intergovernmental Aid

Decentralized systems of government finance give rise to fiscal disparities due to interjurisdictional variations in tax bases and expenditure needs. Intergovernmental aid is used to address such disparities. This article explores changes in local tax capacity and intergovernmental aid resulting from urban shopping malls that extract retail sales and sales tax revenue away from surrounding areas, especially rural counties. A model is developed and estimated to determine the impact of urban malls on local government sales tax bases, controlling for sales tax rate differentials and other factors. The results reveal a 15.9% decline in the sales tax base for counties in close proximity to two newmalls. The analysis is extended to examine impacts of changing local tax capacity on state education aid. Based on the programconsidered here, less than 20% of the loss in own-source revenue is recovered through increased aid.

Did Distortionary Sales Taxation Contribute to the Growth of the Service Sector?

Since the 1950s, the sales tax has become much more widely used as a source of state government revenue and the average sales tax rate has greatly increased. During this period, the service sector ...

The effects of tax increases on negotiated wage increases in the Canadian private sector

The major objective of this study is to estimate the short-run inflationary ‘supply-side’ effects of increases in sales tax rates and income tax rates on Canadian negotiated wage rates. Empirical results are based on an econometric analysis of 867 COLA wage contracts and 1662 non-COLA wage contracts signed during the 1979 to 1992 period in the Canadian private sector. No statistical evidence is found to show that the substantial increases in the average rate of income tax in Canada during this period led to larger negotiated wage increases. On the other hand, it is found that union workers were able to negotiate wage increases to offset part of the increase in consumer prices attributable to increases in sales tax rates. Given a 1% increase in the CPI directly attributable to sales tax increases, non-COLA contracts provided a 0.25% wage increase and COLA contracts provided a 0.75% wage increase. The 6.4% increase in the Canadian Consumer Price Index directly attributable to sales tax increases during the ...

The Impact of Local Sales Tax on the Value of Owner-Occupied Housing

Local governments are under pressure to develop alternative revenue sources to their property tax bases. Among their responses has been an increased reliance on local sales taxes. This study examines the impact of local sales taxes on the value of owner-occupied housing in the Phoenix metropolitan area. The results indicate that differences in local sales tax rates across jurisdictions are capitalized into residential property values in the same way as differences in property tax rates, albeit to a lesser extent because part of the sales tax burden can be exported to nonresidents.

Optimal Local Sales Tax

The paper derives the consequences of a local sales tax within the framework of a spatial, general equilibrium model of an 'open' city. The model is initially set up for the residential economy only, with an exogenously given wage rate. Results of the simulations reveal that there exists a well-defined sales tax Laffer curve and an optimal revenue-maximising tax rate. Incorporation of the production side of the economy, with wage rate adjustment following the imposition of tax, strengthens the case for a higher sales taxation. The optimal sales tax rate appears to be sensitive to the exogenously given property tax rate, housing preferences, housing technologies and the elasticity of labour demand with respect to the wage rate.

Local Sales Tax Options: A Case Study of South Georgia

This study examines the impact of sales tax differentials on taxable sales in rural south Georgia during 1980-89, using a cell-mean corrected regression model. Results indicate that sales tax rate differentials have a significant effect on urban counties’ taxable sales. The level of impact on taxable sales, as measured by its elasticity coefficient, is influenced by the shopping characteristics of the area. A greater number of service and retail establishments tends to lessen the impact of a tax differential as search costs are reduced; nearby shopping alternatives increase the effect as travel costs are reduced. The impact of creating a sales tax differential appears to depend on the shopping attributes of the region relative to its competing areas. In a rural environment where shopping patterns are established and consumers lack convenient shopping alternatives, regional shopping centers have the potential to shift or export part of their tax burden without causing significant loss to their retail trading base.

Earnings-Regulation and Inflation

By analyzing the behavior of Hungarian enterprises in negotiating their position, we present the effect of changing parameters in earnings regulation on inflation Enterprises in a negotiating position must utilize a certain amount of subsidy in order to maintain effectiveness and remain widtin acceptable pricing limits. While pricing and production subsidies are deflationaty in naure, subsidies related to budgetary elements have an inflationary effect Contrry to the popular view, if the sales tax rate is high, increasing the tax rate on profits has a deflationy effect Withholdings attached to budgetary elements bring about deflatio, regardless of the other regulathig elements.