Local option sales taxes and consumer spending patterns: Fiscal interdependence under multi-tiered local taxation
Twenty US states currently allow both county and municipal governments to impose sales taxes on purchases within their jurisdictions. This study investigates the complex multi-jurisdiction and multi-tier dimensions of local option sales taxes (LOSTs) in this setting. We estimate own-rate and cross-tier elasticities using data from 1993 to 2006 for Oklahoma municipalities and counties. Using a variety of panel data techniques including first differenced and random trends models, we show both are significant determinants of consumer spending patterns. Additionally, accounting for localized tax rate differentials reveals important nuances in the interpretation of cross-tier and own-rate elasticities. Our results suggest that municipal LOST revenues can be significantly affected by the rate setting decisions of parent counties as well as nearby regional retail centers. Therefore, the ability of municipal governments to control LOST revenues by varying their own LOST rate is affected by both vertical and horizontal fiscal spillovers. Understanding the nature of fiscal interdependence in this setting is important for the 34 US states that authorize some form of LOSTs as well as any considering their implementation.
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.:
- Esteller-More, Alex & Sole-Olle, Albert, 2001.
"Vertical income tax externalities and fiscal interdependence: evidence from the US,"
Regional Science and Urban Economics,
Elsevier, vol. 31(2-3), pages 247-272, April.
- Esteller-Moré, Álex & Solé-Ollé, Albert, 1999. "Vertical income tax externalities and fiscal interdependence: evidence from the US," ZEW Discussion Papers 99-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- William Stine, 1988. "Estimating property tax base elasticity over time: Evidence on the revenue maximizing politician," Public Choice, Springer, vol. 58(1), pages 35-44, July.
- Rork, Jonathan C., 2003. "Coveting Thy Neighbors' Taxation," National Tax Journal, National Tax Association, vol. 56(4), pages 775-87, December.
- Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
- Leslie E. Papke, 1991.
"Tax Policy and Urban Development: Evidence From The Indiana Enterprise Zone Program,"
NBER Working Papers
3945, National Bureau of Economic Research, Inc.
- Papke, Leslie E., 1994. "Tax policy and urban development : Evidence from the Indiana enterprise zone program," Journal of Public Economics, Elsevier, vol. 54(1), pages 37-49, May.
- Richard Blundell & Alan Duncan & Costas Meghir, 1998.
"Estimating Labor Supply Responses Using Tax Reforms,"
Econometric Society, vol. 66(4), pages 827-862, July.
- Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
- Baicker, Katherine, 2005. "The spillover effects of state spending," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 529-544, February.
- Ballard, Charles L. & Lee, Jaimin, 2007. "Internet Purchases, Cross-Border Shopping, and Sales Taxes," National Tax Journal, National Tax Association, vol. 60(4), pages 711-25, December.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Case, Anne C. & Rosen, Harvey S. & Hines, James Jr., 1993. "Budget spillovers and fiscal policy interdependence : Evidence from the states," Journal of Public Economics, Elsevier, vol. 52(3), pages 285-307, October.
- Abdel-Rahman, Hesham M., 1990. "Agglomeration economies, types, and sizes of cities," Journal of Urban Economics, Elsevier, vol. 27(1), pages 25-45, January.
- Rork, Jonathan C. & Wagner, Gary A., 2008. "Do regions matter in interjurisdictional competition? Evidence from state taxation," Economics Letters, Elsevier, vol. 101(2), pages 116-118, November.
- Buettner, Thiess, 2003. "Tax base effects and fiscal externalities of local capital taxation: evidence from a panel of German jurisdictions," Journal of Urban Economics, Elsevier, vol. 54(1), pages 110-128, July.
- Ladd, Helen F. & Bradbury, Katharine L., 1988. "City Taxes and Property Tax Bases," National Tax Journal, National Tax Association, vol. 41(4), pages 503-23, December.
- Luna, LeAnn & Bruce, Donald J. & Hawkins, Richard R., 2007. "Maxing Out: An Analysis of Local Option Sales Tax Rate Increases," National Tax Journal, National Tax Association, vol. 60(1), pages 45-63, March.
- Stuart, Charles E, 1981. "Swedish Tax Rates, Labor Supply, and Tax Revenues," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1020-38, October.
When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:41:y:2011:i:1:p:46-58. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.