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

  • Fredriksson, Per

    (University of Louisville)

  • Mamun, Khawaja

    ()

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

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.

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File URL: http://repec.sacredheart.edu/she/pdf/wp2009_002.pdf
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File Function: First version, 2009
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Paper provided by Sacred Heart University, John F. Welch College of Business in its series Working Papers with number 2009002.

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Length: 27 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:she:wpaper:2009002
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Web page: http://www.sacredheart.edu/pages/15_john_f_welch_college_of_business.cfm

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