Tax Interdependence in the U.S. States
AbstractState 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 a one percent decrease in the sales tax revenue per capita is associated with a 3 percent or a 0.9 percent increase in the corporate and personal income tax revenue per capita respectively. On average then, an exogenous reduction of $4.5 in the sales tax revenue per capita is compensated, ceteris paribus, with an increase of either $3.4 in the collections per capita from corporate taxes or $3.6 in the ones from personal income taxes. Classification-JEL Codes: H71, H21
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Bibliographic InfoPaper provided by Georgetown University, Department of Economics in its series Working Papers with number gueconwpa~04-04-11.
Date of creation: 11 Apr 2004
Date of revision:
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Other versions of this item:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-11-22 (Accounting & Auditing)
- NEP-ALL-2004-11-22 (All new papers)
- NEP-PBE-2004-11-22 (Public Economics)
- NEP-PUB-2004-11-22 (Public Finance)
- NEP-URE-2004-11-22 (Urban & Real Estate Economics)
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