IDEAS home Printed from https://ideas.repec.org/a/kap/pubcho/v155y2013i1p1-18.html
   My bibliography  Save this article

Tax earmarking, party politics and gubernatorial veto: theory and evidence from US states

Author

Listed:
  • Jeremy Jackson

    ()

Abstract

This paper provides a theory of earmarking based on the relative power of a legislature and executive. The politically powerful use earmarking as a means of resolving uncertainty and insulating preferred policy from the reach of future government. Tax revenue will be earmarked more often when political power is unified under one party or when a party has the legislative majority needed to overturn a gubernatorial veto. An empirical test of the theoretical predictions are conducted using a panel of data for US states. A state with a legislature controlled by a single party with a large enough majority to overturn a gubernatorial veto will earmark 5% more of its tax revenue than other states and a state with a unified government will earmark 6.5% more. Together these explain 18.5% of the observed decrease in the percentage of state tax revenues earmarked from 1954 to 1997. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Jeremy Jackson, 2013. "Tax earmarking, party politics and gubernatorial veto: theory and evidence from US states," Public Choice, Springer, vol. 155(1), pages 1-18, April.
  • Handle: RePEc:kap:pubcho:v:155:y:2013:i:1:p:1-18 DOI: 10.1007/s11127-011-9822-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11127-011-9822-y
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    2. Grossman, Gene M. & Helpman, Elhanan, 2008. "Separation of powers and the budget process," Journal of Public Economics, Elsevier, pages 407-425.
    3. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    4. Cletus C. Coughlin & Thomas A. Garrett & Rubén Hernández-Murillo, 2006. "The geography, economics, and politics of lottery adoption," Review, Federal Reserve Bank of St. Louis, issue May, pages 165-180.
    5. Anesi, Vincent, 2006. "Earmarked taxation and political competition," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 679-701, May.
    6. James M. Buchanan, 1963. "The Economics of Earmarked Taxes," Journal of Political Economy, University of Chicago Press, vol. 71, pages 457-457.
    7. William N. Evans & Ping Zhang, 2007. "The Impact of Earmarked Lottery Revenue on K–12 Educational Expenditures," Education Finance and Policy, MIT Press, vol. 2(1), pages 40-73, January.
    8. Federico Revelli, 2005. "On Spatial Public Finance Empirics," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 475-492, August.
    9. Landry, Craig E. & Price, Michael K., 2007. "Earmarking lottery proceeds for public goods: Empirical evidence from U.S. lotto expenditures," Economics Letters, Elsevier, vol. 95(3), pages 451-455, June.
    10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    11. Athanassakos, Alex, 1990. "General Fund Financing versus Earmarked Taxes: An Alternative Model of Budgetary Choice in a Democracy," Public Choice, Springer, vol. 66(3), pages 261-278, September.
    12. Richard F. Dye & Therese J. McGuire, 1992. "The Effect of Earmarked Revenues On the Level and Composition of Expenditures," Public Finance Review, , vol. 20(4), pages 543-556, October.
    13. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    14. Browning, Edgar K, 1975. "Collective Choice and General Fund Financing," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 377-390, April.
    15. Jeremy J Jackson, 2011. "A legislative bargaining approach to earmarked public expenditures," Economics Bulletin, AccessEcon, vol. 31(3), pages 2006-2020.
    16. Brown, Ryan P. & Rork, Jonathan C., 2005. "Copycat gaming: A spatial analysis of state lottery structure," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 795-807, November.
    17. Neva Novarro, 2004. "Do Policy-Makers Earmark to Constrain their Successors? The Case of Environmental Earmarking," Working Papers 0408, College of the Holy Cross, Department of Economics.
    18. Moe, Terry M, 1991. "Politics and the Theory of Organization," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 106-129, Special I.
    19. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
    20. Dhillon, Amrita & Perroni, Carlo, 2001. "Tax earmarking and grass-roots accountability," Economics Letters, Elsevier, vol. 72(1), pages 99-106, July.
    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. Stivender Carol O. & Gaggl Paul & Amato Louis H. & Farrow-Chestnut Tonya E., 2016. "The Impact of Education Earmarking on State-Level Lottery Sales," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(3), pages 1473-1500, September.

    More about this item

    Keywords

    Earmarking; Veto; Spatial autocorrelation; Separation of powers; D72; D78; H41; H71;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

    Statistics

    Access and download statistics

    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:kap:pubcho:v:155:y:2013:i:1:p:1-18. 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: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    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 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.

    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.