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Fiscal competition and tax instrument choice: the role of income inequality

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  • Joshua Hall

    () (West Virginia University)

Abstract

School districts in Ohio have the choice of two tax instruments with which to raise revenue: the property tax and a residence-based income tax. Economic theory predicts that local governments, if given the choice, would prefer to diversify their tax base to reduce the political costs associated with excessive reliance on one tax. Why then, do some school districts not utilize the income tax? This paper extends earlier work on this issue by showing that income inequality is negatively associated with the choice of an income tax.

Suggested Citation

  • Joshua Hall, 2006. "Fiscal competition and tax instrument choice: the role of income inequality," Economics Bulletin, AccessEcon, vol. 8(12), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-06h70060
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    References listed on IDEAS

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    1. Nechyba, Thomas J, 1997. "Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 351-384, April.
    2. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    3. Spry John Arthur, 2005. "The Effects of Fiscal Competition on Local Property and Income Tax Reliance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-21, January.
    4. David L. Sjoquist & Sally Wallace & Barbara Edwards, 2004. "What a tangled web: local property, income and sales taxes," Chapters,in: City Taxes, City Spending, chapter 3 Edward Elgar Publishing.
    5. Winer, Stanley L. & Hettich, Walter, 1998. "What Is Missed if We Leave Out Collective Choice in the Analysis of Taxation," National Tax Journal, National Tax Association, vol. 51(2), pages 373-389, June.
    6. Romer, Thomas & Rosenthal, Howard, 1982. "Median Voters or Budget Maximizers: Evidence from School Expenditure Referenda," Economic Inquiry, Western Economic Association International, vol. 20(4), pages 556-578, October.
    7. Paul R. Blackley & Larry DeBoer, 1987. "Tax Base Choice by Local Governments," Land Economics, University of Wisconsin Press, vol. 63(3), pages 227-236.
    8. Romer, Thomas & Rosenthal, Howard & Munley, Vincent G., 1992. "Economic incentives and political institutions: Spending and voting in school budget referenda," Journal of Public Economics, Elsevier, vol. 49(1), pages 1-33, October.
    9. Balsdon, Ed & Brunner, Eric J. & Rueben, Kim, 2003. "Private demands for public capital: evidence from school bond referenda," Journal of Urban Economics, Elsevier, vol. 54(3), pages 610-638, November.
    10. J. Biegeleisen & David Sjoquist, 1988. "Rational voting applied to choice of taxes," Public Choice, Springer, vol. 57(1), pages 39-47, April.
    11. Winer, Stanley L. & Hettich, Walter, 1998. "What Is Missed If We Leave Out Collective Choice in the Analysis of Taxation," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 373-89, June.
    12. Hettich, Walter & Winer, Stanley, 1984. "A positive model of tax structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 67-87, June.
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    Cited by:

    1. Joshua Hall & Antonis Koumpias, 2015. "The Volatility of School District Income Tax Revenues: Is Tax Base Diversification a Good Idea?," Working Papers 15-14, Department of Economics, West Virginia University.
    2. Benny Geys & Federico Revelli, 2011. "Economic and Political Foundations of Local Tax Structures: An Empirical Investigation of the Tax Mix of Flemish Municipalities," Environment and Planning C, , vol. 29(3), pages 410-427, June.

    More about this item

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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