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Fiscal zoning and sales taxes: do higher sales taxes lead to more retailing and less manufacturing?

Listed author(s):
  • Daria Burnes
  • Michelle J. White
  • David Neumark

We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to encourage retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is higher significantly in jurisdictions with higher sales tax rates. This suggests that local officials in jurisdictions with higher sales taxes concentrate on attracting large stores and shopping centers. We also find that the effect of local sales taxes on big box and anchor store retail employment is larger in county interiors, where residents tend to be captive to local retailers. Finally, fiscal zoning has the opposite effect on manufacturing employment, suggesting that local officials’ efforts to attract shopping centers and large stores crowd out manufacturing.

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File URL: http://eprints.lse.ac.uk/58081/
File Function: Open access version.
Download Restriction: no

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 58081.

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Length: 23 pages
Date of creation: Jun 2011
Handle: RePEc:ehl:lserod:58081
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  1. Richard Hawkins & Matthew N. Murray, 2004. "Explaining Interjurisdictional Variations in Local Sales Tax Yield," Public Finance Review, , vol. 32(1), pages 82-104, January.
  2. David Neumark & Junfu Zhang & Brandon Wall, 2005. "Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series," PPIC Working Papers 2005.11, Public Policy Institute of California.
  3. Goolsbee, Austan & Zittrain, Jonathan, 1999. "Evaluating the Costs and Benefits of Taxing Internet Commerce," National Tax Journal, National Tax Association, vol. 52(3), pages 413-428, September.
  4. Goolsbee, Austan & Zittrain, Jonathan, 1999. "Evaluating the Costs and Benefits of Taxing Internet Commerce," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 413-28, September.
  5. Michael Wasylenko, 1997. "Taxation and economic development: the state of the economic literature," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 37-52.
  6. Fischel, William A, 1992. "Property Taxation and the Tiebout Model: Evidence for the Benefit View from Zoning and Voting," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 171-177, March.
  7. Sonstelie, Jon C. & Portney, Paul R., 1978. "Profit maximizing communities and the theory of local public expenditure," Journal of Urban Economics, Elsevier, vol. 5(2), pages 263-277, April.
  8. Ohls, James C. & Weisberg, Richard Chadbourn & White, Michelle J., 1974. "The effect of zoning on land value," Journal of Urban Economics, Elsevier, vol. 1(4), pages 428-444, October.
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