State-local Tax Research Articles

State and Local Taxes and Employment by Wage Level

Economists have devoted much attention to understanding the effects of state–local fiscal policies, particularly taxes, on the growth of state-level employment. However, no one has investigated whether the effects differ by wage level. Using a state-level panel data set, the authors investigate the link between state–local taxes and the growth of employment for three wage-level categories. The authors find relatively consistent evidence supporting the proposition that the response of employment growth to changes in taxes differs by wage level.

The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest

State-local tax policies to encourage growth and development have been roundly criticized as detrimental to social welfare. In response, recent proposals have included delimiting the ability of states and localities to fashion tax policies. Not only are such proposals unworkable, but they fail to harness the creative energy and ideas of development practitioners because they act competitively to foster growth and development. The authors propose an alternative basis on which to fashion state-local taxation of business—that is, the so-called benefit principle—which aligns business taxes with costs of government services received by business entities.

Marginal tax rates and state economic growth

This paper analyzes the impact of state-local tax structures on state economic performance. Specifically, growth rates in Gross State Product over the 1969–1986 period are related to several measures of a state's marginal tax environment in addition to more traditional growth determinants. Estimates of marginal tax rates for individual states are derived and utilized alternately with other tax climate surrogates in explaining variations in economic growth. We report both output and productivity equations in order to distinguish separate impacts resulting from taxation; the endogeneity problem is also addressed in this fashion. The findings suggest that, after controlling for overall tax burdens, higher marginal tax rates impede output growth.

A Regional General Equilibrium Model of the United States: Tax Effects on Factor Movements and Regional Production

A six-region general equilibrium model of the United States is used to assess the potential long-run effects of state-local and federal tax policies on output and the allocation of factors across regions and sectors. The nonuniform structure of state-local taxes and their interaction with federal taxes means that regional output is affected quite differently than would be projected solely on the basis of changing average regional tax burdens. The study provides a useful indication of conceptual and empirical issues that must be considered in further regional modeling efforts, issues which do not arise in closed-economy national models. Copyright 1989 by MIT Press.

A Comparative Analysis of Tax Progressivity in the United States

The proliferating array of measures of tax progressivity is applied to the state-local tax structures in the United States in 1977. An attempt is made to classify state structures into most or least progressive and it is shown that there is a great deal of inconsistency among recently proposed alternative measures.

The Distribution of Tax Burdens in the American States: the Determinants of Fiscal Incidence

G IVEN the coercive nature of taxes and their high salience to voters in state and local elections (Hansen 1983: 178), it is hardly surprising that governments take great pains to justify taxes as fair and equitable. Still, most analyses of state and state-local tax systems start with the assumption that they are generally regressive in their overall incidence pattern (Pechman and Okner 1974; Pechman 1985). But some are more regressive than others. What accounts for this variation?

THE DEDUCTIBILITY OF STATE AND LOCAL TAXES

The paper analyzes the much-debated tax reform proposal to eliminate the deductibility of state-local taxes. This change would appear to hurt high income itemizers and not low income non-itemizers,...

Slumpflation and Recent State-Local Tax Trends

Slumpflation and Recent State-Local Tax Trends

A NEW LOOK IN STATE FINANCES: TAX REDUCTION AND RESTRUCTURED TAX SYSTEMS

The face of state finances has changed. In 1973, recurring tax increases, once assumed as inevitable, gave way to widespread tax reduction. Some factors underlying this change: the greater impact of inflation on state income than outgo, the stabilizing of educational costs, and federal revenue sharing. Before this turnabout, states had transformed their finance structures by legislation shifting local fiscal responsibilities to state governments, expanding the use of broad-based taxes, reducing state-local tax regressivity, and instituting tax limitations. Continuance of these developments will depend primarily on state fiscal condition and taxpayers' acceptance of broad-based taxes for property taxes.

Income Tax Credits to Reduce the Regressivity of State‐Local Tax Systems

AT LEAST FOURTEEN STATES and the District of Columbia currently offer some of their residents refundable credits against personal income taxes designed to reduce the regressivity of their state-local tax systems. This paper reviews existing credit plans and their economic effectiveness, and offers various suggestions for improvement. Credits for sales taxes are discussed in Part II and property tax credits in Part III. These credit plans are an outgrowth of a number of state tax system studies which uniformly demonstrated that state sales and property taxes are most burdensome on that segment of the population least able to pay (1). That is, both sales and property taxes are regressive with respect to current income. This relationship is accepted without reservation for the sales tax since the percentage of family income spent on items subject to the general sales tax has been shown to decrease as income increases. This occurs both because of proportionately higher saving among higher income families and because of the lack of sales taxes on many services which are predominantly purchased by those with higher incomes. Although the residential property tax is regressive with respect to current income, several recent studies have shown it to be approximately proportional to permanent income. This result is explained by the infrequency with which individuals change housing, with the result that many families consume either more or less housing than is justified by their current income (2). Many families with temporarily low income do experience cash flow problems which make property tax payments difficult. For this reason alone, some form of property tax relief for those with low current incomes may be justified (3). In addition, for those with permanently low incomes, the property tax does constitute a major outlay which may not be considered equitable by society. This is particularly true of the elderly poor who may own a home but have insufficient cash income to buy food after paying their taxes. Individuals who rent tend to be worse off in that they do not even own a home as an asset. Both property and sales tax credit plans have been referred to as little negative income taxes, since in most cases the taxpayer is eligible for a refund if his credit is larger than his income tax liability. If a person pays

State-local tax systems: Proposals and objectives

“One man's views” of a high-quality state-local revenue system, spelling out in some detail the proper mix of components that should go into an “ideal” system.

DIFFERENCES IN FISCAL CAPACITY AND EFFORT: THEIR SIGNIFICANCE FOR A FEDERAL REVENUE-SHARING SYSTEM

Under pending proposals for Federal revenue sharing, the region of state-local taxes or "all general revenue" to personal income in the respective states would be used as the basis for adjusting then allocations for relative fiscal effort. This seems to presume either that personal income data closely indicate the states' relative financing capability or that no better measures are possible. Both presumptions can be questioned. A recent study estimates each state's revenue capacity in terms of the prevailing state-local revenue system, and supplies related measures of its revenue effort. For numerous states, these effort findings differ materially from those resting on personal income data. Regular annual preparation of explicit revenue capacity figures (feasible at modest cost and effort) would permit sounder effort adjustments in revenue sharing and better interstate fiscal comparisons than are now possible.

Developments in State-Local Tax Systems and Their Implications for Agriculture

Developments in State-Local Tax Systems and Their Implications for Agriculture

Discussion: Developments in State-Local Tax Systems and Their Implications for Agriculture

Discussion: Developments in State-Local Tax Systems and Their Implications for Agriculture

A STUDY OF THE COUNTERCYCLICAL ASPECTS OF TOTAL GOVERNMENT FISCAL POLICY, 1929-40*

THE PURPOSE OF THIS study is to investigate the countercyclical aspects of federal-state-local fiscal policy during the period of 1929-40 and to consider the implications of this analysis as it relates to the feasibility of coordinating countercyclical fiscal policy at all three levels of government. There are serious limitations to a co-ordinated federal, state, and local fiscal program for economic stabilization. These limitations are (1) the bias of state and local tax structures in favor of taxing consumption and the inflexibility of state and local tax structures; (2) the legal, institutional, and market difficulties experienced by state and local governments in obtaining credit; (3) the inability of state and local governments to stabilize capital expenditures; (4) the over-all failure of total government net spending to be properly timed, co-ordinated, and of a sufficient magnitude to replace the deficiency in private spending. A long-run vision will envisage progress in overcoming many of the difficulties of state and local governments; however, the immediate emphasis of this study is on the encouraging findings that would seem to verify the feasibility of a co-ordinated fiscal program. These encouraging factors were as follows: (1) During the 1930's social and economic conditions fostered a higher level of federalstate spending, reflecting a growing sense of responsibility for economic stabilization. (2) State-local tax and spending structures became more centralized during the 1930's, with state taxes and spending a larger ratio of the total. States are in a better position to pursue a countercyclical fiscal policy than are local governments. States have more and better-administered tax sources, better borrowing facilities, and a more flexible, dispersed spending program than do local governments. (3) Federal grants and federal loans to state and local governments played an anticyclical role during the 1930's and offer a means by which federal, state, and local fiscal policy may be

Federal State Local Tax Correlation

Federal State Local Tax Correlation

Federal State Local Tax Correlation.

Federal State Local Tax Correlation.