State Tax Structures Research Articles

Impacts of state tax and resource ownership policies on extraction: Evidence from U.S. natural gas production

We analyze the impact of different state tax structures and resource ownership policies on natural and shale gas production. Using state-level, quarterly data from seven of the largest shale gas-producing states from 2007 to 2020, we find evidence that both the type of taxation method and the presence of a forced pooling law impact natural gas production. Using random effects models, we find that impact fees do not significantly affect either natural gas or shale gas production relative to severance taxes. Conversely, we find that in states with volume-based tax rates, quarterly natural gas production increases by 2.5 % relative to those states with revenue-based tax rates. We also find that the existence of a forced pooling law decreases quarterly natural gas production with an estimated decline of between 2.6 % to 3.8 % relative to states where no forced pooling law exists. These findings show that the restrictions imposed by forced pooling laws have larger impacts on production compared with different severance tax structures.

Tax Exporting through Federal Deductibility of State and Local Taxes: A Cross-state Analysis

Federal deductibility of certain state and local taxes (SALT) creates an opportunity for state and local governments to export their deductible taxes. Using the Internal Revenue Service's Statistics of Income data, this research estimates the extent to which a state can export its tax burden. The research furthermore shows that a state with higher levels of deductible taxes exports more of its tax burden, and relevant state tax structure features and federal tax reforms infuence the exportability of state and local taxes. The empirical evidence reveals that tax exporting through federal deductibility creates a moral hazard because it incentivizes states and localities to increase their broad-based taxes in the belief that a part of the tax burden will be borne by other jurisdictions. The findings shed light on the ongoing debate on federal policies constraining the deductibility of certain state and local taxes.

Distributional Impacts of State and Local Tax Policy in a Heterogeneous-agent Model

This article presents a dynamic heterogeneous-agent life-cycle model with housing demand to evaluate the economic implications of reforming US state and local personal tax structures. Because of the extensive reliance of state and local governments on income, sales, and property tax revenue, those three taxes are explicitly modeled to generate a baseline and varied to evaluate alternative policy proposals. The results of the model show that the sales tax burden falls evenly across the distribution of income earners, while the property tax burden falls more heavily on the highest income earners. By design, the model’s income tax is progressive, so the tax burden shares rise with income. Results also show that the property tax generally improves utilitarian social welfare relative to income and sales taxation, but the magnitude of these gains depends on the availability of a state and local tax deduction on federal income taxes.

Wealth Taxes and Inequality

We analyze the optimal combination of wealth and labor tax rates in a model where wealth-to-income ratios and wealth inequality are rising endogenously due to unbalanced technological improvement in a two-sector economy. We consider rich and poor households, financial and housing wealth, and find that a realistic optimal steady state tax structure includes some taxation of labor, zero taxation of financial wealth, a housing wealth tax on rich households and a housing wealth subsidy on poor households. These findings are robust with respect to variations in the housing demand elasticity.

Progressive State Taxes and Welfare

Classic fiscal federalism theory dictates that income redistribution should be undertaken at the federal level. However, this maxim is frequently violated at the state level when states employ progressive tax systems to support services such as health care, affordable housing, and welfare. Relatively little research has explored the relationship between progressive tax systems and the potential redistributive benefits. Our goal is to investigate how relatively progressive tax systems are associated with the number of welfare recipients in order to gain a better understanding of the redistributive components in the tax and expenditure sides of the budget. Our article explores this relationship using a panel of data for 50 states, spanning 13 years (1990–2002). The data include welfare recipients, state‐specific information on Temporary Assistance for Needy Families programs (and Aid to Families with Dependent Children for years prior to 1997), multiple measures of tax progressivity, and demographic variables. We find that there is a positive relationship between the relative progressivity of a state's tax portfolio and the number of welfare recipients, which suggests that state tax structures and spending portfolios might be used as complementary tools to redistribute income. This result, however, is sensitive to the specification of progressivity.

Planning for retail change: a survey of municipal governments in Washington State

Effectively managing retail is essential for municipalities in terms of meeting land use planning goals, developing revenue sources through taxation, furthering economic growth and providing access to goods and services for residents. In 2013, a survey was conducted to examine the retail planning practices of all the 110 small- and medium-sized municipalities in Washington State. The online survey addressed data collection and analysis, land use, retail recruitment, inter-jurisdictional cooperation and evaluation. A large majority of respondents had retail planning goals in their comprehensive plans, yet only 30% dedicated staff for implementation. Jurisdictions would benefit from regional retail planning (especially in light of changes underway from e-commerce), yet the state tax structure places municipalities in competition.

Smoothing State Tax Revenues Over the Business Cycle: Gauging Fiscal Needs and Opportunities

The high degree of fiscal stress experienced by state governments in the 2001 and the 2007–2009 recessions has prompted renewed discussions of alternative approaches to stabilizing state finances over the business cycle. Prompted by evidence of increased state tax revenue cyclicality in the aggregate, this study explores state-specific patterns so as to inform policymakers in individual states. It finds that while elasticity levels continued to differ across states, most states experienced greater cyclical sensitivity in the 2000s than in the 1980s and 1990s. In addition, during the 2000s personal income tax receipts varied more over the business cycle than sales tax receipts in most states that imposed both forms of taxation. This trend represented a departure from the patterns of the prior two decades, when sales tax receipts were more cyclically sensitive than individual income tax receipts in the majority of states. Cross-section regressions reveal that the main source of variation in income tax elasticities across states during the 2000s was the cyclical sensitivity of their residents’ incomes as reflected on their federal income tax returns. By contrast, state-specific features such as the tax treatment of capital gains or the progressivity of tax rates did not account for significant differences in revenue elasticities across states. In addition, state departures from the federal definitions of adjusted gross income and taxable income, on the whole, did not contribute to increased revenue volatility over the business cycle. The findings are used to evaluate the efficacy of alternative measures that could be used to help stabilize state revenues, including reforms of state tax and stabilization trust structures.

Tax structure and state economic growth during the Great Recession

Concern about the effect of taxes on economic growth and development in the United States is longstanding. While most studies are concerned with the growth impacts of tax burden, marginal rates, or the impact of a particular tax, there are few works that examine the impact of tax structure in the way it is defined in this work. Here, tax structure is defined as the shares of revenue collected by various taxes. Using a pool of data on the 50 states between 2004 and 2010, this paper explores the relationship between state and local tax structure and growth of real per-capita GDP through the Great Recession centered in 2008. The results are used to generate estimates of the growth impacts of revenue neutral changes in tax shares.

BASE MOBILITY AND STATE PERSONAL INCOME TAXES

In the spirit of the elasticity of taxable income literature, which has primarily considered federal taxes using individual data, we estimate panel regressions of state personal income tax bases on state tax rates, structures, and other controls. We consider actual tax base data gathered directly from revenue officials, a calculated tax base defined as collections divided by the top tax rate, and total AGI on federal returns. Results indicate that higher marginal tax rates have no impact on actual bases reported by the states, small negative effects on federal AGI, and larger negative effects on calculated bases.

Are State Governments Prepared for Fiscal Crises? A Look at Revenue Diversification during the 1990s

The financial condition of state and local governments has long been held as a prominent topic of discussion among government administrators, public economists, and political scholars. This article addresses the competing hypotheses of revenue diversification and revenue complexity and offers an empirical analysis of the various factors that affect state tax revenue diversification. The findings suggest that although political and demographic factors influence the level of state tax revenue diversification, economic factors and whether a state utilizes an income or sales tax to generate revenue represent the greatest determinants of state tax structures. As a result, this article serves as a foundation to initiate the development of a comprehensive theory of the determinants of state tax structures.

Changes in state tax structures: true comprehensive reform or artifacts of incrementalism?

Using data obtained from the National Conference of State Legislatures (NCSL), we investigate modifications in state tax codes to determine their characteristics, the apparent trends of state tax reform, and whether changes constituted comprehensive reform or mere incremental adjustments to existing tax structures. Based on the data, we find that few states achieved comprehensive tax reform in the 1990s despite the fiscal surplus that provided an environment conducive to widespread change. Moreover, we find that a significant number of changes that were enacted in the 1990s involved increases or decreases in state tax revenue that were ultimately tied to economic cycles. We suggest that adequacy in state tax collections may be the most common tax principle adhered to with regard to changes in tax structure. We also conclude that reform efforts in the 1990s were most successful when approached in an incremental fashion in the absence of a significant precipitating reform driver.

State Corporate Tax Revenue Trends: Causes and Possible Solutions

Previous articleNext article No AccessState Corporate Tax Revenue Trends: Causes and Possible SolutionsWilliam F. Fox and LeAnn LunaWilliam F. Fox Search for more articles by this author and LeAnn Luna Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by National Tax Journal Volume 55, Number 3September 2002Policy Issues for Taxing Times Published for: The National Tax Association Article DOIhttps://doi.org/10.17310/ntj.2002.3.07 Views: 11Total views on this site Citations: 5Citations are reported from Crossref © 2002 National Tax Association. All rights reserved.PDF download Crossref reports the following articles citing this article:LeAnn Luna and Matthew N. Murray THE EFFECTS OF STATE TAX STRUCTURE ON BUSINESS ORGANIZATIONAL FORM, National Tax Journal 63, no.4.24.2 (Mar 2021): 995–1021.https://doi.org/10.17310/ntj.2010.4S.08Sanjay Gupta, Jared Moore, Jeffrey Gramlich, and Mary Ann Hofmann Empirical Evidence on the Revenue Effects of State Corporate Income Tax Policies, National Tax Journal 62, no.22 (Mar 2021): 237–267.https://doi.org/10.17310/ntj.2009.2.03Gary C. Cornia and Barrett A. Slade Horizontal Inequity in the Property Taxation of Apartment, Industrial, Office, and Retail Properties, National Tax Journal 59, no.11 (Mar 2021): 33–55.https://doi.org/10.17310/ntj.2006.1.02William F. Fox, Matthew N. Murray, and LeAnn Luna How Should a Subnational Corporate Income Tax on Multistate Businesses Be Structured?, National Tax Journal 58, no.11 (Mar 2021): 139–159.https://doi.org/10.17310/ntj.2005.1.07Iris J. Lav Piling on Problems: How Federal Policies affect State Fiscal Conditions, National Tax Journal 56, no.33 (Mar 2021): 535–554.https://doi.org/10.17310/ntj.2003.3.06

Effects of Unitary vs. Nonunitary State Income Taxes on Interstate Resource Allocation: Some Analytical and Simulation Results

This study examines the optimal location choice decisions of a two-state firm in response to changing state corporate income tax rates and tax structures. Because the firm can engineer its tax liability by manipulating between-state location of sales, property, and payroll, changes in relative state tax rates should result in the firm making such location changes. Results of a model firm simulation, examining various combinations of state tax rates and unitary vs. nonunitary tax structures, found that the firm would make interstate resource changes to minimize company-wide state income taxes. Important findings of the study are that tax rate changes in nonunitary states may cause little or no change in resources used in that state. Indeed, in one scenario, the resulting resource flows from a tax increase are favorable to the nonunitary state, making a tax increase a win-win situation for the state government (higher tax revenue and more economic activity). In contrast, changes in unitary state tax rates can result in significant resource changes in both the unitary state and in other states. The finding that tax rate cuts are ineffective in nonunitary states implies that these states may be more successful in attracting investment by changes affecting apportionment factors (tax credits for new capital, or new jobs) or by use of nontax incentives.

State sales and income taxes: an economic analysis

As state governments grapple with increased revenue needs or demands for state tax reform, they typically must choose between relying on an income tax system or utilizing a sales tax, perhaps in conjunction with a corporate franchise tax. Choosing between these two tax options is often a contentious process, and many arguments can arise in the debates surrounding this issue. In this study of small, open economic systems, George R. Zodrow addresses the relative advantages and disadvantages of state sales and income taxes from an economic perspective. He evaluates the two options in terms of the criteria commonly used in the public finance literature, including economic efficiency, fairness, administrative simplicity, and tax exportability. Zodrow's study emphasizes how the comparison of state sales and income taxes is critically affected by the details of the alternative tax structures being considered, as well as by the nature of the interactions between the economy of a state and the rest of the nation and world, and by the interactions between the state and federal tax systems in the United States. He also considers briefly two alternatives to state sales and income taxes--increased utilization of user charges and the adoption of a state tax based on mildly progressive taxation of individual consumption rather than income. In the chapter, Zodrow applies his analysis to the current Texas tax system as well as proposals for the introduction of a state income tax. This provocative case study will serve as an informative contribution to the continuing public policy debate over the state tax structure.

Developments in Local Government Finance: Theory and Policy

Part 1 New solutions to old problems: who uses local public services? Need, demand and rationing in action, Glen Bramley on the use of statistical techniques to infer territorial spending needs, Alan Duncan and Peter Smith judgement and analysis - developing indexes of economic and social deprivation for local authority financing, Paul Chapman a model for optimum local authority size, David King. Part 2 Applying theory to the real world: impacts of economic change on a local business tax base - the case of the French taxe professionelle, Remy Prud'homme local public spending in France - the case of welfare programmes at the department level, Guy Gilbert and Yvon Rocaboy authorities expenditure behaviour in Italy and regional differences, Rosella Levaggi the short-period macroeconomic incidence and effects of state and local taxes, Anthony Laramie and Douglas Mair. Part 3 Local government and local policy-making - autonomy and constraints: changing perceptions of the role of local government with particular reference to the United Kingdom, Peter Else governance of two national health services - Italy and UK compared, George France local autonomy and the European Union structural fund transfers - the special case of regional policy, Erich Thoeni the requirement of a balanced local budget - theory and evidence from the Swiss experience, Bernard Dafflon. Part 4 Fiscal issues for existing and future federations: the political economy of state and local tax structure, Howard Chernick and Andrew Reschovsky European integration and local government finance, Stephen Smith tax harmonization and tax competition at state-local levels - lessons from Switzerland, Werner Pommerehne and Gebhard Kirchgassner.

The effects of casino gambling on state tax revenue

A theoretical model of state tax structure implies that revenue enhancement due to the introduction of casino gambling is less likely in states where incomes taxes do not exist and where casino tax rates are lower than the corresponding tax rates on sales taxable and excise taxable goods. Further, it is clear that casino gambling is likely to adversely impact lottery tax revenues earmarked for education. Due to the cross-price effects of gambling, tax revenues will likely decline in states that introduce nontaxable casino gambling on Indian reservations. In the longer term, as casino gambling proliferates increasing competition among states, there will be negative revenue consequences due to fewer tourism and employment dollars.

The Effect of Taxes and Insurance Costs On Automobile Registrations in the United States

We investigate the determinants of United States automobile registrations in states in 1986, focusing on state and local taxes and fees, and on auto insurance premiums. Using data on state tax and fee structures and the results of a phone survey of states where automobiles are subject to property taxes, we calculate tax and fee costs for a "new" and an "old" car. Regression results show that new car taxes have httle effect on registrations, probably because owners respond to higher taxes by buying older, cheaper cars. Higher old car taxes reduce registrations because low-income owners cannot buy older or cheaper cars and thereby abandon ownership. Insurance premiums appear to have a negative effect on registrations.

STATE TAX STRUCTURE AND MULTIPLE POLICY OBJECTIVES

We use a portfolio model of state tax structure to examine how a state's economy and the nature of its taxes affect the choices available to state policymakers. Data from North Carolina and Massach...

Comment on "Tax Exporting, Federal Deductibility, and State Tax Structure"

Comment on "Tax Exporting, Federal Deductibility, and State Tax Structure"

Comment on "Tax Exporting Federal Deductibility, and State Tax Structure"

Comment on "Tax Exporting Federal Deductibility, and State Tax Structure"