Advanced Search
MyIDEAS: Login to save this paper or follow this series

US Excise Tax Horizontal Interdependence: Yardstick vs. Tax Competition

Contents:

Author Info

  • Leonzio Rizzo

    ()

  • Alejandro Esteller - Moré

Abstract

US excise tax rates are state interdependent. For example, a one-cent increase in the cigarette tax rate implies a contemporaneous cigarette tax increase of 0.18 cents in the neighboring state, while in the case of gasoline taxation the reaction to the same rise is just 0.11 cents. However, identifying the source of this interaction is key to its normative assessment. Our empirical analysis – spanning the period 1992 to 2006 – finds that interdependence in the case of gasoline taxation is driven just by the (fear of) base mobility. By contrast, in the case of cigarette taxation, it is politically driven: only states with non-term limited governors react (providing evidence of yardstick competition), especially as the election year approaches. Additionally, cigarette taxes tend to be lower when the election year approaches, but again only under non-term limited governors, while the existence of smokers in the state tends to reduce the level of cigarette taxation independently of the electoral cycle and of the presence of a term limited governor.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://out.economia.unife.it/uploads/dip_deit/quaderni/201116.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Ferrara, Department of Economics in its series Working Papers with number 201116.

as in new window
Length: 33 pages
Date of creation: 11 Nov 2011
Date of revision:
Handle: RePEc:udf:wpaper:201116

Contact details of provider:
Postal: Via Voltapaletto, 11 - I-44121 Ferrara (Italy)
Phone: +39 0532 455006
Fax: +39 0532 205349
Web page: http://dipem.economia.unife.it/
More information through EDIRC

Related research

Keywords: vertical tax competition; yardstick competition; termlimit; election year;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. List, John & Sturm, Daniel M, 2004. "How Elections Matter: Theory and Evidence from Environmental Policy," CEPR Discussion Papers 4489, C.E.P.R. Discussion Papers.
  2. Marie C. Thursby & Jerry G. Thursby, 1994. "Interstate Cigarette Bootlegging: Extent, Revenue Losses, and Effects of Government Intervention," NBER Working Papers 4763, National Bureau of Economic Research, Inc.
  3. Vrijburg, H. & Jacobs, J.P.A.M. & Ligthart, J.E., 2007. "Consumption tax competition among governments: Evidence from the United States," Research Report 07008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  4. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  5. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2004. "Yardstick competition in intergovernmental relationships: theory and empirical predictions," Economics Letters, Elsevier, vol. 83(3), pages 325-333, June.
  6. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  7. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
  8. Fredriksson, Per & Mamun, Khawaja, 2009. "Tobacco Politics and Electoral Accountability in the United States," Working Papers 2009003, Sacred Heart University, John F. Welch College of Business.
  9. Alesina, Alberto & Passarelli, Francesco, 2014. "Regulation versus taxation," Journal of Public Economics, Elsevier, vol. 110(C), pages 147-156.
  10. David Bartolini & Raffaella Santolini, 2012. "Political yardstick competition among Italian municipalities on spending decisions," The Annals of Regional Science, Springer, vol. 49(1), pages 213-235, August.
  11. Esteller-Moré, Alejandro & Rizzo, Leonzio, 2011. "(Uncontrolled) Aggregate Shocks Or Vertical Tax Interdependence? Evidence From Gasoline And Cigarettes," National Tax Journal, National Tax Association, vol. 64(2), pages 353-79, June.
  12. Joseph M. Johnson & W. Mark Crain, 2004. "Effects of Term Limits on Fiscal Performance: Evidence from Democratic Nations," Public Choice, Springer, vol. 119(1_2), pages 73-90, 04.
  13. Buchanan, James M., 1976. "Taxation in fiscal exchange," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 17-29.
  14. Rork, Jonathan C., 2003. "Coveting Thy Neighbors' Taxation," National Tax Journal, National Tax Association, vol. 56(4), pages 775-87, December.
  15. Ben Lockwood & Giuseppe Migali, 2009. "Did The Single Market Cause Competition in Excise Taxes? Evidence From EU Countries," Economic Journal, Royal Economic Society, vol. 119(536), pages 406-429, 03.
  16. Egger, Peter & Pfaffermayr, Michael & Winner, Hannes, 2005. "An unbalanced spatial panel data approach to US state tax competition," Economics Letters, Elsevier, vol. 88(3), pages 329-335, September.
  17. SALMON, Pierre, 1987. "Decentralization as an incentive scheme," Institut des Mathématiques Economiques – Document de travail de l’I.M.E. (1974-1993) 98, Institut des Mathématiques Economiques. LATEC, Laboratoire d'Analyse et des Techniques EConomiques, CNRS, Université de Bourgogne.
  18. Hunter, William J & Nelson, Michael A, 1990. "Excise Taxation and the Theory of Tax Exploitation," Public Finance = Finances publiques, , vol. 45(2), pages 268-82.
  19. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
  20. Michael A. Nelson, 2002. "Using Excise Taxes to Finance State Government: Do Neighboring State Taxation Policy and Cross-Border Markets Matter?," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 731-752.
  21. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal and Vertical Indirect Tax Competition: Theory and Some Evidence From the USA," CEPR Discussion Papers 4470, C.E.P.R. Discussion Papers.
  22. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Luca Salvadori & José María Durán-Cabré & Alejandro Esteller-Moré, 2012. "Regional Competition On Tax Administration," ERSA conference papers ersa12p184, European Regional Science Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:udf:wpaper:201116. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alberto Benati).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.