Coveting Thy Neighbors' Taxation
Recent research has shown that a state’s overall tax burden is dependent on that of neighboring states. By disaggregating a state’s tax burden into its individual components, this paper demonstrates that during the period of 1967–1996, state taxes with a mobile tax base had positive response rates as high as 60 percent. Thus, a 10 percent increase in neighboring states’ rates was met by an increase of up to 6 percent in the home state’s rate. Taxes with relatively immobile tax bases exhibit negative responsiveness, meaning that states respond to rate increases in neighboring states by decreasing home rates.
Volume (Year): 56 (2003)
Issue (Month): 4 (December)
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