IDEAS home Printed from https://ideas.repec.org/a/fip/fedbne/y2001p27-43n4.html
   My bibliography  Save this article

Are state and local revenue systems becoming obsolete?

Author

Listed:
  • Robert Tannenwald

Abstract

As recently as a year ago, state governments were awash in revenue, but reports from state revenue officials suggest that growth in tax receipts has slowed considerably in recent quarters. The flow of tax revenues into state coffers has decelerated primarily because the economy has suffered a severe shock (it was weakening even before September 11) and delayed tax cuts enacted in earlier, more prosperous times have taken full effect. However, many tax analysts believe that long-term economic, technological, and political trends are also partially responsible and will continue to constrain state revenue growth even after the economy revives. ; This article discusses the impact on state and local revenues of three such trends: the shift in the nation's mix of production and consumption from goods to services; the proliferation of electronic commerce; and the intensification of interjurisdictional competition. The author concludes that state and local tax systems are, indeed, out-of-sync with the economy's changing structure. He suggests greater voluntary coordination among tax jurisdictions in tax design and enforcement as the most promising strategy for enhancing revenue productivity. He also notes that more selective use of business tax incentives would help state and local governments to raise adequate revenues without significantly sacrificing other tax policy goals. ; Whatever state and local tax reforms are adopted, the author writes, long-run potential threats to the revenue productivity and stability of subnational revenue systems should be continuously reevaluated. With the federal government shifting its priorities in the wake of the attacks on September 11, the states and their municipalities might be called upon to shoulder significantly wider domestic fiscal responsibilities. They should possess revenue systems that will enable them to meet these responsibilities effectively.

Suggested Citation

  • Robert Tannenwald, 2001. "Are state and local revenue systems becoming obsolete?," New England Economic Review, Federal Reserve Bank of Boston, pages 27-43.
  • Handle: RePEc:fip:fedbne:y:2001:p:27-43:n:4
    as

    Download full text from publisher

    File URL: http://www.bostonfed.org/economic/neer/neer2001/neer401b.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/neer/neer2001/neer401b.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1373-90, December.
    2. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(4), pages 1373-1390, December.
    3. Fortin, Pierre & Keil, Manfred & Symons, James, 2001. "The Sources of Unemployment in Canada, 1967-91: Evidence from a Panel of Regions and Demographic Groups," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 67-93, January.
    4. Graham S. Toft, 1996. "Doing battle over the incentives war: improve accountability but avoid federal noncompete mandates," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 37-40.
    5. Alice M. Rivlin, 1996. "An economic war," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 20-25.
    6. Walter Hellerstein, 1996. "Commerce clause restraints on state tax incentives," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 60-63.
    7. Timothy J. Bartik, 2004. "Economic Development," Book chapters authored by Upjohn Institute researchers, in: J. Richard Aronson & Eli Schwartz (ed.),Managememnt Policies in Local Government Finance, pages 355-390, W.E. Upjohn Institute for Employment Research.
    8. Robert B. Reich, 1996. "Bidding against the future?," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 26-30.
    9. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
    10. Chris Farrell, 1996. "The economic war among the states: an overview," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 4-7.
    11. Kenneth E. Poole & George A. Erickcek & Donalad T. Iannone & Nancy McCrea & Pofen Lin Salem, 1999. "Evaluating Business Development Incentives," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number gaw1999, January-J.
    12. Philip P. Frickey, 1996. "The congressional process and the constitutionality of federal legislation to end the economic war among the states," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 58-59.
    13. Joe P. Mattey & Mark M. Spiegel, 1996. "On the efficiency effects of tax competition for firms," The Region, Federal Reserve Bank of Minneapolis, vol. 10(Jun), pages 50-51.
    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


    Cited by:

    1. Thomas A. Garrett & Gary A. Wagner, 2009. "Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 71-90, February.
    2. Saeid Mahdavi, 2013. "State Government Tax Revenue, Tax Revenue Composition and Tax Effort Index: An Assessment of the 1978-97 period," Working Papers 0213eco, College of Business, University of Texas at San Antonio.
    3. Tidiane Ly, 2019. "Taxes, traffic jam and spillover in the metropolis," Working Papers halshs-02283118, HAL.
    4. Gary A. Wagner, 2010. "Commentary on \\"can state and local governments rely on alternative tax sources?\\"," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 102-107.
    5. Richard H. Mattoon, 2004. "The state of the state and local government sector: fiscal issues in the Seventh District," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 28(Q I), pages 2-17.
    6. Tidiane Ly, 2019. "Taxes, traffic jam and spillover in the metropolis," Working Papers halshs-02275672, HAL.
    7. Tidiane Ly, 2019. "Taxes, traffic jam and spillover in the metropolis," Working Papers 1925, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    2. Propheter Geoffrey, 2015. "Political Institutions and State Sales Tax Base Erosion," Statistics, Politics and Policy, De Gruyter, vol. 6(1-2), pages 1-17, December.
    3. Horacio L. P. Piffano, 2007. "Argentina and Brazil: Fiscal Harmonization and Subnational Sales Taxation – State / Provincial VAT versus State / Provincial Retail Sales Tax," Department of Economics, Working Papers 069, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    4. David Hanrahan, 2020. "Digitalization as a Determinant of Tax Revenues in OECD Countries: A Static and Dynamic Panel Data Analysis," EIIW Discussion paper disbei285, Universitätsbibliothek Wuppertal, University Library.
    5. Bruno Albuquerque & Georgi Krustev, 2018. "Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 459-481, June.
    6. William F. Fox and Matthew N. Murray, 2003. "Sales Taxation in Global Economy," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0320, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Donald Bruce & John Deskins, 2012. "Can state tax policies be used to promote entrepreneurial activity?," Small Business Economics, Springer, vol. 38(4), pages 375-397, May.
    8. Argilés-Bosch, Josep M. & Somoza, Antonio & Ravenda, Diego & García-Blandón, Josep, 2020. "An empirical examination of the influence of e-commerce on tax avoidance in Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
    9. Tessa Conroy & Harvey Cutler & Stephan Weiler, 2016. "The State-Level Impacts of Enforcing Sales Taxes for E-retail Purchases," Growth and Change, Wiley Blackwell, vol. 47(2), pages 276-295, June.
    10. Robert Tannenwald, 2004. "Massachusetts business taxes: unfair? inadequate? uncompetitive?," Public Policy Discussion Paper 04-4, Federal Reserve Bank of Boston.
    11. Richard Green & Kerry Vandell, "undated". "The Impact of Technology on the Internet on Commercial Real Estate," Wisconsin-Madison CULER working papers 01-11, University of Wisconsin Center for Urban Land Economic Research.
    12. Brian E. Whitacre, 2011. "Do higher broadband adoption rates mean lower tax collections from local retail sales? Implications of e-commerce in rural areas of the US," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(2), pages 71-85, June.
    13. Tiantian Dai & Shenyi Jiang & Xiangbo Liu & Wen Wang, 2016. "The Impact of Internet Sales Tax in a Search Model of Money: Some Analytical Results," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 133-144, May.
    14. Saxon, Nicholas & Tosun, Mehmet S. & Yang, Jingjing, 2015. "State and Local Sales Taxes and Business Activity in the United States," IZA Discussion Papers 9413, Institute of Labor Economics (IZA).
    15. Austan Goolsbee, 2001. "The Implications of Electronic Commerce for Fiscal Policy (and Vice Versa)," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 13-23, Winter.
    16. 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;National Tax Journal, vol. 60(1), pages 45-63, March.
    17. Marina Capparucci & Emanuela Ghignoni & Alina Verashchagina & Natalia Vorozhbit, 2015. "The Drivers of Innovation in the Italian Manufacturing Sector," Economia & lavoro, Carocci editore, issue 3, pages 111-128.
    18. Hilber, Christian A.L., 2010. "New housing supply and the dilution of social capital," Journal of Urban Economics, Elsevier, vol. 67(3), pages 419-437, May.
    19. Bommer, Rolf, 1995. "Environmental policy and industrial competitiveness: The pollution haven hypothesis reconsidered," Discussion Papers, Series II 262, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    20. Teresa Garcia-Milà & Therese J. McGuire, 2001. "Tax incentives and the city," Economics Working Papers 631, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2001.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:2001:p:27-43:n:4. 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: . General contact details of provider: https://edirc.repec.org/data/frbbous.html .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/frbbous.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.