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Gubernatorial Reputation and Vertical Tax Externalities: All Smoke, No Fire?

Author

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  • Fredriksson, Per

    (University of Louisville)

  • Mamun, Khawaja

    (John F. Welch College of Business, Sacred Heart University)

Abstract

This paper investigates whether reputation-building strategies guide U.S. governors’ responses to changes in federal cigarette taxes (i.e. vertical tax interactions). Using 1975-2000 state cigarette tax data, we find that reputation-building strategies affect the nature of vertical tax externalities. Lame duck governors exhibit a more negative response to changes in the federal cigarette tax. Thus, by reducing the state tax base and by causing a decline in the state tax, an increase in the federal tax rate reduces state tax revenues in states headed by lame ducks.

Suggested Citation

  • Fredriksson, Per & Mamun, Khawaja, 2009. "Gubernatorial Reputation and Vertical Tax Externalities: All Smoke, No Fire?," Working Papers 2009002, Sacred Heart University, John F. Welch College of Business.
    • Handle: RePEc:she:wpaper:2009002
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    File URL: http://repec.sacredheart.edu/she/pdf/wp2009_002.pdf
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    More about this item

    Keywords

    Vertical Tax Interactions; Fiscal Federalism; Reputation-building; Electoral Accountability; Political Institutions;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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