Separation of Powers or Ideology? What Determines the Tax Level? Theory and Evidence from the US States
AbstractWe find the surprising result that the tax level is negatively correlated with the size of the Democratic majority in the interval in which the Democrats hold between 50 and 66% of the seats in the state Legislatures. This negative relationship suggests the failure of a simple ideological model that had found some support in the literature, that the main determinant of the tax level is the extent of partisan control over the Legislature. We compare this model with an alternative: a separation-of-powers model in which ideology plays no role in determining the tax level. The driving force of our model is the overlap between the supporters of the Governor and the supporters of the legislative majority. The tax level at first rises and then decreases as the size of the ruling majority increases above 50% of the seats, whether the legislative majority is of the same party as the Governor or from the opposition. This non-monotonic relationship is observed in the data and explained by our model.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 10/620.
Length: 49 pages
Date of creation: Oct 2010
Date of revision:
Separation of powers; divided government; line-item veto; tax level; semiparametric.;
Find related papers by JEL classification:
- H00 - Public Economics - - General - - - General
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-10-23 (Accounting & Auditing)
- NEP-ALL-2010-10-23 (All new papers)
- NEP-CDM-2010-10-23 (Collective Decision-Making)
- NEP-PBE-2010-10-23 (Public Economics)
- NEP-POL-2010-10-23 (Positive Political Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Per Pettersson-Lidbom, 2008. "Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1037-1056, 09.
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