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Local Revenue Hills: A General Equilibrium Specification with Evidence from Four U.S. Cities

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Listed:
  • Andrew Haughwout
  • Robert Inman
  • Steven Craig
  • Thomas Luce

Abstract

We provide estimates of the impact and long-run elasticities of tax base with respect to tax rates for four large U.S. cities: Houston (property taxation), Minneapolis (property taxation), New York City (property, general sales, and income taxation), and Philadelphia (property, gross receipts, and wage taxation). Results suggest that all four of our cities are near the peaks of their longer-run revenue hills. Equilibrium effects are observed within three to four fiscal years after the initial increase in local tax rates. A significant negative impact (current period) effect of a balanced budget increase in city property tax rates on city property base is interpreted as a capitalization effect and suggests that marginal increases in city spending do not provide positive net benefits to property owners. Estimates of the effects of taxes on city employment levels for New York City and Philadelphia the two cities for which employment series are available show the local income and wage tax rates have significant negative effects on city employment levels.

Suggested Citation

  • Andrew Haughwout & Robert Inman & Steven Craig & Thomas Luce, 2000. "Local Revenue Hills: A General Equilibrium Specification with Evidence from Four U.S. Cities," NBER Working Papers 7603, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7603
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    References listed on IDEAS

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    Cited by:

    1. Andrew F. Haughwout, 2001. "Infrastructure and social welfare in metropolitan America," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-16.
    2. Enid Slack, 2006. "Cities in Canadian Federalism," International Tax Program Papers 0603, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    3. Albert SolÈ OllÈ & Elisabet Viladecans Marsal, "undated". "CreaciÛn de empleo e impuestos municipales: evidencia empÌrica con datos de panel," Studies on the Spanish Economy 102, FEDEA.
    4. Haughwout, Andrew F. & Inman, Robert P., 2001. "Fiscal policies in open cities with firms and households," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 147-180, April.
    5. Buettner, Thiess, 2001. "Fiscal externalities in local tax competition: empirical evidence from a panel of German jurisdictions," ZEW Discussion Papers 01-11, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Albert Solé Ollé & Elisabet Viladecans Marsal, 2003. "Fiscal and growth spillovers in large urban areas," Working Papers 2003/1, Institut d'Economia de Barcelona (IEB).

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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