IDEAS home Printed from https://ideas.repec.org/a/wly/jpamgt/v35y2016i2p415-440.html
   My bibliography  Save this article

Easy Money: Tax Exporting and State Support for Higher Education

Author

Listed:
  • John M. Foster
  • Jacob Fowles

Abstract

There is a substantial literature that assesses the effects of tax‐exporting capacities on the tax structures and aggregate spending levels that state governments choose to implement, but no work exists that isolates the effects of state tax exporting on higher education spending. Using state‐level data for 1989, 1995, 2002, and 2007, we estimate for the median voter in each state the change in the marginal cost of higher education subsidization generated by tax exportation, and calculate the increased higher education spending that results. We consider three types of spending: state appropriations to public universities as well as need‐ and non‐need‐based aid awarded to in‐state students. We find that neither type of aid is responsive to the marginal cost, or tax price, faced by the median voter. However, the median voter's price elasticity of demand for state appropriations is statistically significant and negative. We find that the median voter's tax price is substantially reduced by the presence of prominent mining and tourism industries and by the federal deductibility offset available to firms. Thus, these tax‐exporting capacities exert upward pressure on voter demand for state appropriations to public universities.

Suggested Citation

  • John M. Foster & Jacob Fowles, 2016. "Easy Money: Tax Exporting and State Support for Higher Education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(2), pages 415-440, April.
    • Handle: RePEc:wly:jpamgt:v:35:y:2016:i:2:p:415-440
    DOI: 10.1002/pam.21813
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/pam.21813
    Download Restriction: no
    File URL: https://libkey.io/10.1002/pam.21813?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Metcalf, Gilbert E., 2011. "Assessing the Federal Deduction for State and Local Tax Payments," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 565-590, June.
    2. Berry, Christopher R. & Glaeser, Edward L., 2005. "Divergence of Human Capital Levels across Cities," Working Paper Series rwp05-057, Harvard University, John F. Kennedy School of Government.
    3. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
    4. William R. Johnson, 2006. "Are Public Subsidies to Higher Education Regressive?," Education Finance and Policy, MIT Press, vol. 1(3), pages 288-315, June.
    5. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    6. Donald E. Heller, 1997. "Student Price Response in Higher Education," The Journal of Higher Education, Taylor & Francis Journals, vol. 68(6), pages 624-659, November.
    7. Lowry, Robert C., 2001. "The effects of state political interests and campus outputs on public university revenues," Economics of Education Review, Elsevier, vol. 20(2), pages 105-119, April.
    8. Gravelle, Jane G., 2004. "The Corporate Tax: Where Has It Been and Where Is It Going?," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 903-923, December.
    9. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1243-1284.
    10. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
    11. Wildasin, David E., 1988. "The (Apparent) Demise of Sales Tax Deductibility: Issues for Analysis and Policy," National Tax Journal, National Tax Association, vol. 41(3), pages 381-89, September.
    12. Gilbert E. Metcalf, 1993. "Tax exporting, federal deductibility, and state tax structure," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 109-126.
    13. Koshal, Rajindar K. & Koshal, Manjulika, 1999. "Economies of scale and scope in higher education: a case of comprehensive universities," Economics of Education Review, Elsevier, vol. 18(2), pages 269-277, April.
    14. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
    15. Marvin A. Titus, 2009. "The Production of Bachelor's Degrees and Financial Aspects of State Higher Education Policy: A Dynamic Analysis," The Journal of Higher Education, Taylor & Francis Journals, vol. 80(4), pages 439-468, July.
    16. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-330, March.
    17. Christopher R. Berry & Edward L. Glaeser, 2005. "The divergence of human capital levels across cities," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 407-444, August.
    18. Wildasin, David E., 1988. "The (Apparent) Demise of Sales Tax Deductibility: Issues for Analysis and Policy," National Tax Journal, National Tax Association;National Tax Journal, vol. 41(3), pages 381-389, September.
    19. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels Across Cities," NBER Working Papers 11617, National Bureau of Economic Research, Inc.
    20. McPherson, Michael S & Schapiro, Morton Owen, 1991. "Does Student Aid Affect College Enrollment? New Evidence on a Persistent Controversy," American Economic Review, American Economic Association, vol. 81(1), pages 309-318, March.
    21. Bahl, Roy & Martinez-Vazquez, Jorge & Wallace, Sally, 2002. "State and Local Government Choices in Fiscal Redistribution," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(4), pages 723-742, December.
    22. Michael K. McLendon & James C. Hearn & Christine G. Mokher, 2009. "Partisans, Professionals, and Power: The Role of Political Factors in State Higher Education Funding," The Journal of Higher Education, Taylor & Francis Journals, vol. 80(6), pages 686-713, November.
    23. Robert B. Archibald & David H. Feldman, 2006. "State Higher Education Spending and the Tax Revolt," The Journal of Higher Education, Taylor & Francis Journals, vol. 77(4), pages 618-644, July.
    24. Gravelle, Jane G., 2011. "Reducing Depreciation Allowances to Finance a Lower Corporate Tax Rate," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(4), pages 1039-1053, December.
    25. Brad R. Humphreys, 2000. "Do Business Cycles Affect State Appropriations to Higher Education?," Southern Economic Journal, John Wiley & Sons, vol. 67(2), pages 398-413, October.
    26. repec:aei:rpaper:37721 is not listed on IDEAS
    27. Jack H. Knott & A. Abigail Payne, 2004. "The impact of state governance structures on management and performance of public organizations: A study of higher education institutions," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(1), pages 13-30.
    28. Robert Toutkoushian & Paula Hollis, 1998. "Using Panel Data to Examine Legislative Demand for Higher Education," Education Economics, Taylor & Francis Journals, vol. 6(2), pages 141-157.
    29. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels across Cities," Harvard Institute of Economic Research Working Papers 2091, Harvard - Institute of Economic Research.
    30. Gravelle, Jane G. & Gravelle, Jennifer, 2007. "How Federal Policymakers Account for the Concerns of State and Local Governments in the Formulation of Federal Tax Policy," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(3), pages 631-648, September.
    31. Eric Brunner & Stephen L. Ross & Ebonya Washington, 2011. "Economics and Policy Preferences: Causal Evidence of the Impact of Economic Conditions on Support for Redistribution and Other Ballot Proposals," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 888-906, August.
    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. Whitney B. Afonso & Jeremy G. Moulton, 2024. "Local sales tax exportation: The impact of commuters, tourists, and college students on the tax base," Public Budgeting & Finance, Wiley Blackwell, vol. 44(1), pages 38-59, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John M. Foster & Jacob Fowles, 2018. "Ethnic Heterogeneity, Group Affinity, and State Higher Education Spending," Research in Higher Education, Springer;Association for Institutional Research, vol. 59(1), pages 1-28, February.
    2. Liang Zheng, 2016. "What city amenities matter in attracting smart people?," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 309-327, June.
    3. Broxterman, Daniel A. & Yezer, Anthony M., 2015. "Why does skill intensity vary across cities? The role of housing cost," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 14-27.
    4. Nicole Litzel & Joachim Möller, 2011. "Industrial Clusters and Economic Integration: Theoretic Concepts and an Application to the European Metropolitan Region Nuremberg," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume II, chapter 12, Edward Elgar Publishing.
    5. Aurélie LALANNE & Guillaume POUYANNE, 2012. "Ten years of metropolization in economics: a bibliometric approach (In French)," Cahiers du GREThA (2007-2019) 2012-11, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    6. Benjamin Austin & Edward Glaeser & Lawrence Summers, 2018. "Jobs for the Heartland: Place-Based Policies in 21st-Century America," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 151-255.
    7. Anthony M. Yezer & Daniel A. Broxterman, 2014. "Why Does Skill Intensity Vary Across Cities? Housing Cost and True Human Capital," Working Papers 2014-15, The George Washington University, Institute for International Economic Policy.
    8. Südekum, Jens, 2008. "Convergence of the skill composition across German regions," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 148-159, March.
    9. Andrea Bonaccorsi & Daniele Biancardi & Mabel Sanchez Barrioluengo & Federico Biagi, 2019. "Study on Higher Education Institutions and Local Development," JRC Research Reports JRC117272, Joint Research Centre.
    10. Marigee Bacolod & Bernardo S. Blum & William C. Strange, 2010. "Elements Of Skill: Traits, Intelligences, Education, And Agglomeration," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 245-280, February.
    11. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
    12. Winters, John V., 2011. "Human capital, higher education institutions, and quality of life," Regional Science and Urban Economics, Elsevier, vol. 41(5), pages 446-454, September.
    13. Edward L. Glaeser & Naomi Hausman, 2019. "The Spatial Mismatch between Innovation and Joblessness," NBER Chapters, in: Innovation Policy and the Economy, Volume 20, pages 233-299, National Bureau of Economic Research, Inc.
    14. John V. Winters, 2013. "Human capital externalities and employment differences across metropolitan areas of the USA," Journal of Economic Geography, Oxford University Press, vol. 13(5), pages 799-822, September.
    15. Gilles Duranton & Diego Puga, 2020. "The Economics of Urban Density," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 3-26, Summer.
    16. Winters, John V., 2014. "The Production and Stock of College Graduates for U.S. States," IZA Discussion Papers 8730, Institute of Labor Economics (IZA).
    17. Howard Chernick, 2010. "Redistribution at the State and Local Level: Consequences for Economic Growth," Public Finance Review, , vol. 38(4), pages 409-449, July.
    18. Wu, Wei-ping & Chen, Zi-gui & Yang, Dong-xiao, 2020. "Do internal migrants crowd out employment opportunities for urban locals in China?—Reexamining under the skill stratification," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 537(C).
    19. Seung-hun Chung & Mark D. Partridge, 2019. "Are shocks to human capital composition permanent? Evidence from the Mariel boatlift," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 461-515, December.
    20. Winters, John V., 2014. "STEM graduates, human capital externalities, and wages in the U.S," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 190-198.

    More about this item

    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:wly:jpamgt:v:35:y:2016:i:2:p:415-440. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/journal/34787/home .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.