The Effect of Federal Tax Deductibility on State and Local Taxes and Spending
AbstractThis paper examines the effect of federal deductibility of state and local taxes on the fiscal behavior of state and local governments. The primary finding is that deductibil ity affects the way that state and local governments finance their sp ending as well as the overall level of spending. More specifically, i n states in which federal deductibility implies a relatively low cost of using deductible personal taxes (including income, sales, and pro perty taxes), there is greater reliance on those taxes and less reliance on business taxes and other revenue sources. The effect of deductibility on the state and local financial mix implies that deductibility has a much lower cost to the federal government than has previously been assumed.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2766699.
Date of creation: 1987
Date of revision:
Publication status: Published in Journal of Political Economy
Other versions of this item:
- Feldstein, Martin S & Metcalf, Gilbert E, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 710-36, August.
- Martin Feldstein & Gilbert Metcalf, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," NBER Working Papers 1791, National Bureau of Economic Research, Inc.
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