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Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing?

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  • Daria Burnes
  • David Neumark
  • Michelle J. White

Abstract

We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is significantly increased in jurisdictions where sales tax rates increase. We also find that manufacturing employment is significantly lowered in these jurisdictions. These results suggest that local officials in jurisdictions with higher sales tax rates concentrate on attracting large stores and shopping centers and that their efforts crowd out manufacturing. A rise of one percentage point in a county-level local sales tax rate is predicted to result in 258 additional retail jobs and the loss of 838 manufacturing jobs.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16932.

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Date of creation: Apr 2011
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Publication status: published as Burnes, Daria, David Neumark, and Michelle White, “Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing,” forthcoming in National Tax Journal.
Handle: RePEc:nbr:nberwo:16932

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  1. David Neumark & Junfu Zhang & Brandon Wall, 2005. "Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series," PPIC Working Papers 2005.11, Public Policy Institute of California.
  2. Richard Hawkins & Matthew N. Murray, 2004. "Explaining Interjurisdictional Variations in Local Sales Tax Yield," Public Finance Review, , vol. 32(1), pages 82-104, January.
  3. Fischel, William A, 1992. "Property Taxation and the Tiebout Model: Evidence for the Benefit View from Zoning and Voting," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 171-77, March.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Higher local sale tax leads to more local retail activity
    by Economic Logician in Economic Logic on 2011-05-26 16:38:00
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Cited by:
  1. Dan S. Rickman, 2013. "Should Oklahoma Be More Like Texas? A Taxing Decision," The Review of Regional Studies, Southern Regional Science Association, vol. 43(1), pages 1-22, Summer.

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