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Election periods and state tax policy cycles

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  • John Mikesell

Abstract

The policy and political outcomes that can be fruitfully studied using the electoral period as an analytic foundation range broadly. The present research has shown that much of the pattern of state tax policy change can be traced directly to that source. It suggests strongly that state parties are concerned with gaining and retaining political power and that the severity of public reaction declines with the passage of time. The outcome is a distinct rate change cycle with the broad based taxes. Beyond the apparent conclusion that tax reform efforts should be directed toward the first year of a gubernatorial term, there are some additional implications relating to other questions. First, the findings may help explain the relationship reported independently by Oates (1975, p. 150) and Goetz (1977, p. 184) that state governments with more income-elastic tax structures increase expenditure per capita by greater amount than those with less elastic structures. Politically, state governments find it rational to increase statutory rates of major taxes at two points in the election cycle (Y l-3 and Y l-1 ). A more elastic tax structure can provide greater funding between these politically attractive tax points. Another implication of the analysis is that the pattern of state tax policy changes may be economically destabilizing. The study clearly demonstrates the higher frequency of activity in the Y l-;3 and Y l-1 years. At the same time, a large number of states are on a 1974–1978 election cycle. Certain years are thus particularly likely to show major state tax increases, for certain reasons that have nothing to do with national aggregate demand policy. Fiscal policy, thus, must be prepared to counteract this potentially destabilizing force external to normal federal control. A final implication relates directly to state budgets. Some years are more likely to show new funds available for public programs because of the tax policy-electoral period cycle. These years will be substantially more attractive for budget expansion than would be others. Agencies subjected to zero base review in those years or proposing major new expenditure initiatives then may be expected to fare better than in other years. Copyright Martinus Nijhoff Publishers b.v 1978

Suggested Citation

  • John Mikesell, 1978. "Election periods and state tax policy cycles," Public Choice, Springer, vol. 33(3), pages 99-106, January.
  • Handle: RePEc:kap:pubcho:v:33:y:1978:i:3:p:99-106
    DOI: 10.1007/BF00154687
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    References listed on IDEAS

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    1. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-263, April.
    2. Albert Breton, 1974. "The economic theory of representative government: A reply," Public Choice, Springer, vol. 20(1), pages 129-133, December.
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    Cited by:

    1. Diane Lim Rogers & John H. Rogers, 1995. "Political competition, causal relationships between taxes and spending, and their influence on government size: evidence from state-level data," International Finance Discussion Papers 500, Board of Governors of the Federal Reserve System (U.S.).
    2. Antoine Cazals & Alexandre Sauquet, 2015. "How do elections affect international cooperation? Evidence from environmental treaty participation," Public Choice, Springer, vol. 162(3), pages 263-285, March.
    3. William Hunter & Michael Nelson, 1989. "Interest group demand for taxation," Public Choice, Springer, vol. 62(1), pages 41-61, July.
    4. Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence From Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association, vol. 47(4), pages 799-816, December.
    5. Alexandre SAUQUET & Antoine CAZALS, 2013. "When does cooperation win and why? Political cycles and participation in international environmental agreements," Working Papers 201320, CERDI.
    6. Foremny, Dirk & Riedel, Nadine, 2014. "Business taxes and the electoral cycle," Journal of Public Economics, Elsevier, vol. 115(C), pages 48-61.
    7. Ashworth, John & Heyndels, Bruno, 2002. "Tax Structure Turbulence in OECD Countries," Public Choice, Springer, vol. 111(3-4), pages 347-376, June.
    8. Richard H. Mattoon & William A. Testa, 1992. "State and local governments' reaction to recession," Economic Perspectives, Federal Reserve Bank of Chicago, issue Mar, pages 19-27.
    9. Klien, Michael, 2014. "Tariff increases over the electoral cycle: A question of size and salience," European Journal of Political Economy, Elsevier, vol. 36(C), pages 228-242.
    10. Ashworth, John & Geys, Benny & Heyndels, Bruno, 2006. "Determinants of tax innovation: The case of environmental taxes in Flemish municipalities," European Journal of Political Economy, Elsevier, vol. 22(1), pages 223-247, March.
    11. Richard Schwindt & Aidan Vining & Steven Globerman, 2000. "Net loss: A cost-benefit analysis of the Canadian Pacific salmon fishery," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(1), pages 23-45.
    12. Stine, William F., 1994. "Is Local Government Revenue Response to Federal Aid Symmetrical? Evidence from Pennsylvania County Governments in a Era of Retrenchment," National Tax Journal, National Tax Association, vol. 47(4), pages 799-816, December.
    13. Geys, Benny & Vermeir, Jan, 2008. "The political cost of taxation: new evidence from German popularity ratings
      [Besteuerung und Popularität von Politikern: Neue Ergebnisse für die Deutsche Bundesregierung 1978-2003]
      ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-06, Social Science Research Center Berlin (WZB).
    14. Shanna Rose, 2006. "Do fiscal rules dampen the political business cycle?," Public Choice, Springer, vol. 128(3), pages 407-431, September.
    15. repec:bla:metroe:v:68:y:2017:i:4:p:699-729 is not listed on IDEAS
    16. Benny Geys & Jan Vermeir, 2008. "Taxation and presidential approval: separate effects from tax burden and tax structure turbulence?," Public Choice, Springer, vol. 135(3), pages 301-317, June.
    17. Genser, Bernd & Weck-Hannemann, Hannelore, 1992. "Fuel taxation in EC counties: A political economy approach," Discussion Papers, Series II 192, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    18. Helene Ehrhart, 2013. "Elections and the structure of taxation in developing countries," Public Choice, Springer, vol. 156(1), pages 195-211, July.
    19. 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.
    20. Benny Geys, 2013. "Election Cycles in MPs' Outside Interests? The UK House of Commons, 2005–2010," Political Studies, Political Studies Association, vol. 61(2), pages 462-472, June.

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