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Tax Structure and Public Sector Growth

  • Daniel R. Feenberg
  • Harvey S. Rosen

It has been hypothesized that a jurisdiction's tax structure exerts an independent effect upon the growth of its public sector. We test this hypothesis by examining the relationship between the growth of state general expenditure and the elasticity of tax revenues with respect to income. The work takes advantage of a very careful set of income elasticities for the personal income and sales tax systems for each state, for every year from 1978 to 1983. The main conclusion is that the data do not support the notion that the form of the tax structure exerts an independent effect on public sector growth.

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File URL: http://www.nber.org/papers/w2020.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2020.

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Date of creation: Sep 1986
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Publication status: published as Feenberg, Daniel R. and Harvey S. Rosen. "Tax Structure and Public Sector Growth," Journal of Public Economics, Vol. 32, No. 1, Feb. 1987, pp. 185-201 .
Handle: RePEc:nbr:nberwo:2020
Note: PE
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  1. Eleanor Craig & A. Heins, 1980. "The effect of tax elasticity on government spending," Public Choice, Springer, vol. 35(3), pages 267-275, January.
  2. Thomas J. D, 1982. "Tax Elasticity and the Growth of Local Public Expenditure," Public Finance Review, , vol. 10(3), pages 385-392, July.
  3. Courant, Paul N & Gramlich, Edward M & Rubinfeld, Daniel L, 1979. "Public Employee Market Power and the Level of Government Spending," American Economic Review, American Economic Association, vol. 69(5), pages 806-17, December.
  4. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
  5. Samuel H. Baker, 1983. "The Determinants of Median Voter Tax Liability: an Empirical Test of the Fiscal Illusion Hypothesis," Public Finance Review, , vol. 11(1), pages 95-108, January.
  6. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  7. repec:cup:cbooks:9780521027922 is not listed on IDEAS
  8. Charles H. Breeden & William J. Hunter, 1985. "Tax Revenue and Tax Structure," Public Finance Review, , vol. 13(2), pages 216-224, April.
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