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Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions

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  • Wang, Lingxiao
  • Zheng, Yuqing

Abstract

Grocery food sales taxes (or grocery taxes) in the United States are applied in the form of a state and/or county tax. To investigate how local governments establish these grocery taxes, we develop a dynamic gaming model to explain the county–county and county–state interactions regarding grocery taxes. Leveraging novel panel data on grocery taxes at county and state levels from 2006 to 2017, we estimate a dynamic spatial model including multilevel governments. The empirical evidence unveils three key spatial determinants that contribute to variations in county grocery tax rates. (1) A negative vertical impact from the home state, (2) a positive horizontal effect from neighboring counties, and (3) a positive diagonal effect from neighboring states.

Suggested Citation

  • Wang, Lingxiao & Zheng, Yuqing, 2024. "Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    • Handle: RePEc:eee:regeco:v:104:y:2024:i:c:s0166046223000947
    DOI: 10.1016/j.regsciurbeco.2023.103959
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    More about this item

    Keywords

    Grocery sales taxes; Spatial tax competition; Multilevel government interaction; Commodity taxation;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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