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Fiscal competition and tax instrument choice: the role of income inequality

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  • Joshua Hall

    ()
    (West Virginia University)

Abstract

School districts in Ohio have the choice of two tax instruments with which to raise revenue: the property tax and a residence-based income tax. Economic theory predicts that local governments, if given the choice, would prefer to diversify their tax base to reduce the political costs associated with excessive reliance on one tax. Why then, do some school districts not utilize the income tax? This paper extends earlier work on this issue by showing that income inequality is negatively associated with the choice of an income tax.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 8 (2006)
Issue (Month): 12 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-06h70060

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  1. Brueckner, Jan K. & Saavedra, Luz A., 2001. "Do Local Governments Engage in Strategic Property-Tax Competition?," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 203-30, June.
  2. Balsdon, Ed & Brunner, Eric J. & Rueben, Kim, 2003. "Private demands for public capital: evidence from school bond referenda," Journal of Urban Economics, Elsevier, vol. 54(3), pages 610-638, November.
  3. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(2), pages 351-84, April.
  4. Paul R. Blackley & Larry DeBoer, 1987. "Tax Base Choice by Local Governments," Land Economics, University of Wisconsin Press, vol. 63(3), pages 227-236.
  5. Hettich, Walter & Winer, Stanley, 1984. "A positive model of tax structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 67-87, June.
  6. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 64, pages 416.
  7. Winer, Stanley L. & Hettich, Walter, 1998. "What Is Missed If We Leave Out Collective Choice in the Analysis of Taxation," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 373-89, June.
  8. J. Biegeleisen & David Sjoquist, 1988. "Rational voting applied to choice of taxes," Public Choice, Springer, vol. 57(1), pages 39-47, April.
  9. Romer, Thomas & Rosenthal, Howard & Munley, Vincent G., 1992. "Economic incentives and political institutions: Spending and voting in school budget referenda," Journal of Public Economics, Elsevier, vol. 49(1), pages 1-33, October.
  10. Romer, Thomas & Rosenthal, Howard, 1982. "Median Voters or Budget Maximizers: Evidence from School Expenditure Referenda," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 20(4), pages 556-78, October.
  11. Spry John Arthur, 2005. "The Effects of Fiscal Competition on Local Property and Income Tax Reliance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-21, January.
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Cited by:
  1. Benny Geys & Federico Revelli, 2011. "Economic and political foundations of local tax structures: an empirical investigation of the tax mix of Flemish municipalities," Environment and Planning C: Government and Policy, Pion Ltd, London, Pion Ltd, London, vol. 29(3), pages 410-427, June.

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