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Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing?

  • Daria Burnes
  • David Neumark
  • Michelle J. White

We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract 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 significantly increased in jurisdictions where sales tax rates increase. We also find that manufacturing employment is significantly lowered in these jurisdictions. These results suggest that local officials in jurisdictions with higher sales tax rates concentrate on attracting large stores and shopping centers and that their efforts crowd out manufacturing. A rise of one percentage point in a county-level local sales tax rate is predicted to result in 258 additional retail jobs and the loss of 838 manufacturing jobs.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16932.

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Date of creation: Apr 2011
Date of revision:
Publication status: published as Burnes, Daria, David Neumark, and Michelle White, “Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing,” forthcoming in National Tax Journal.
Handle: RePEc:nbr:nberwo:16932
Note: LS PE
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  1. 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.
  2. Richard Hawkins & Matthew N. Murray, 2004. "Explaining Interjurisdictional Variations in Local Sales Tax Yield," Public Finance Review, , vol. 32(1), pages 82-104, January.
  3. Neumark, David & Zhang, Junfu & Wall, Brandon, 2005. "Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series," IZA Discussion Papers 1774, Institute for the Study of Labor (IZA).
  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 171-77, March.
  7. 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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