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 reliance on business taxes and other revenue sources. The effect of deductibility on the state and local financial mix implies that deductibility has a much lower cost to the federal government than has previously been assumed.
|Date of creation:||1987|
|Publication status:||Published in Journal of Political Economy|
|Contact details of provider:|| Postal: Littauer Center, Cambridge, MA 02138|
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- 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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