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Do Tax And Expenditure Limitations Affect The Size And Growth Of State Government?

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  • RONALD J. SHADBEGIAN

Abstract

This paper focuses on citizens' ability to restrict the size and growth of state government through the use of tax and expenditure limitations (TELs). Most TEL laws are not designed to stop public sector growth but are intended to cap it relative to personal income growth. Evidence indicates that the design of TEL laws increases the elasticity of government size (and growth) with respect to income. Thus, TEL laws, as they currently are written, allow states with high income growth to keep increasing the size of the public sector. Meanwhile, they prevent states with low income growth from doing likewise. While TELs restrict government size and growth in states with below average income, in general they have no significant effect on the size or growth of government. Therefore, as long as income growth is high, TELs end up as little more than political cover for state legislatures. Copyright 1996 Western Economic Association International.

Suggested Citation

  • Ronald J. Shadbegian, 1996. "Do Tax And Expenditure Limitations Affect The Size And Growth Of State Government?," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 22-35, January.
  • Handle: RePEc:bla:coecpo:v:14:y:1996:i:1:p:22-35
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    2. Shonchoy, Abu S., 2010. "Determinants of government consumption expenditure in developing countries : a panel data analysis," IDE Discussion Papers 266, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Christoph A. Schaltegger & Lars P. Feld, 2004. "Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-Federal Jurisdictions," CESifo Working Paper Series 1294, CESifo Group Munich.
    4. Cutler, David M. & Elmendorf, Douglas W. & Zeckhauser, Richard, 1999. "Restraining the Leviathan: property tax limitation in Massachusetts," Journal of Public Economics, Elsevier, vol. 71(3), pages 313-334, March.
    5. Heiko T. Burret & Lars P. Feld, 2018. "Vertical effects of fiscal rules: the Swiss experience," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(3), pages 673-721, June.
    6. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 181-208 National Bureau of Economic Research, Inc.
    7. John A. Dove, 2016. "Do fiscal constraints prevent default? Historical evidence from U.S. municipalities," Economics of Governance, Springer, vol. 17(2), pages 185-209, May.
    8. Latzko, David A., 2008. "Home Rule and the Size of County Government in Pennsylvania," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 38(1).
    9. repec:eee:poleco:v:51:y:2018:i:c:p:69-92 is not listed on IDEAS
    10. Heinemann, Friedrich & Moessinger, Marc-Daniel & Yeter, Mustafa, 2015. "Do Fiscal Rules Constrain Fiscal Policy? A Meta-Regression-Analysis," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112800, Verein für Socialpolitik / German Economic Association.
    11. Robert B. Archibald & David H. Feldman, 2004. "State Higher Education Spending and the Tax Revolt," Working Papers 10, Department of Economics, College of William and Mary.
    12. Tucker Staley, 2015. "The Effect of TELs on State Revenue Volatility: Evidence From the American States," Public Budgeting & Finance, Wiley Blackwell, vol. 35(1), pages 29-48, March.
    13. Poterba, James M. & Rueben, Kim S., 2001. "Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields," Journal of Urban Economics, Elsevier, vol. 50(3), pages 537-562, November.
    14. John A. Dove, 2017. "Property Tax Limits, Balanced Budget Rules, and Line-Item Vetoes: A Long-Run View," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 43(2), pages 288-317, March.
    15. Heiko T. Burret & Lars P. Feld, 2016. "Effects of Fiscal Rules - 85 Years' Experience in Switzerland," CESifo Working Paper Series 6063, CESifo Group Munich.
    16. repec:eee:poleco:v:52:y:2018:i:c:p:166-191 is not listed on IDEAS
    17. Jonathan Millar, 1997. "The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization," Staff Working Papers 97-15, Bank of Canada.
    18. repec:ces:ifodic:v:12:y:2014:i:1:p:19108838 is not listed on IDEAS
    19. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.

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