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Tax and Expenditure Limitations and State Credit Ratings

Author

Listed:
  • Judith I. Stallmann
  • Steven Deller
  • Lindsay Amiel
  • Craig Maher

Abstract

The impact of state tax and expenditure limitations (TELs) on bond credit ratings is estimated using an incomplete (or unbalanced) panel from the US states from 1973 to 2005. Three indices of the restrictiveness of TELs are used. Both Moody’s and Standard and Poor’s bond credit ratings are used and the outcomes compared. The results are consistent with previous work; more restrictive revenue TELs are associated with lower credit ratings while expenditure TELs are generally associated with higher credit ratings. TELs restricting both revenues and expenditures are negatively associated with Moody’ ratings, but not with those of Standard and Poor’s. Contrary to previous studies, the authors find limited differences in the fiscal and economic variables that influence the ratings of the two agencies.

Suggested Citation

  • Judith I. Stallmann & Steven Deller & Lindsay Amiel & Craig Maher, 2012. "Tax and Expenditure Limitations and State Credit Ratings," Public Finance Review, , vol. 40(5), pages 643-669, September.
    • Handle: RePEc:sae:pubfin:v:40:y:2012:i:5:p:643-669
    DOI: 10.1177/1091142112446844
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    References listed on IDEAS

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    5. Can Chen & Kenneth A. Kriz & Qiushi Wang, 2016. "How Does the Health of Transportation Infrastructure Affect State Credit Ratings? An Empirical Analysis," Public Finance Review, , vol. 44(5), pages 660-680, September.
    6. Steven Deller & Craig Maher & Judith Stallmann, 2021. "Do tax and expenditure limitations exacerbate rising income inequality?," Economics and Politics, Wiley Blackwell, vol. 33(3), pages 611-643, November.

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