The Effect of Federal Tax Deductibility on State and Local Taxes and Spending
This paper examines the effect of federal deductibility of state and local taxes on the fiscal behavior of state and local governments. The primary finding is that deductibil ity affects the way that state and local governments finance their sp ending as well as the overall level of spending. More specifically, i n states in which federal deductibility implies a relatively low cost of using deductible personal taxes (including income, sales, and pro perty taxes), there is greater reliance on those taxes and less relia nce on business taxes and other revenue sources. The effect of deduct ibility on the state and local financial mix implies that deductibili ty has a much lower cost to the federal government than has previousl y been assumed. Copyright 1987 by University of Chicago Press.
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- Martin Feldstein, 1983. "Behavioral Simulation Methods in Tax Policy Analysis," NBER Books, National Bureau of Economic Research, Inc, number feld83-2, March.
- Edward M. Gramlich & Harvy Galper, 1973. "State and Local Fiscal Behavior and Federal Grant Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 15-66.
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- Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-96, June.
- Martin Feldstein, 1983. "Introduction to "Behavioral Simulation Methods in Tax Policy Analysis"," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 1-6 National Bureau of Economic Research, Inc.
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