Politics or mobility? Evidence from us excise taxation
AbstractWe test for the state interdependence of gasoline and cigarette taxation in the US (1975-2006). We estimate a tax reaction function, and find that state interdependence is due solely to yardstick competition, since any interaction disappears completely in the case of states with lame duck governors. This result holds for both taxes: the short-run reaction of those states whose governor is eligible to stand for reelection is 0.13 and 0.21 for gasoline and cigarette taxation, respectively. In the long run, the cigarette tax rates levied in a jurisdiction match those of its neighbors perfectly, while the long-run reaction in the case of gasoline is much lower at 0.72.
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Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/3.
Length: 25 pages
Date of creation: 2010
Date of revision:
Tax competition; political accountability; excise taxes;
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-PBE-2010-05-02 (Public Economics)
- NEP-POL-2010-05-02 (Positive Political Economics)
- NEP-PUB-2010-05-02 (Public Finance)
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