THE LONG-RUN ECONOMIC IMPACTS OF FEDERAL,STATE, AND LOCAL FISCAL POLICIES IN METROPOLITAN AREAS*

ABSTRACT. This paper uses new estimates of metropolitan factor demand and output supply functions to study how federal, state, and local fiscal policies affect metropolitan economies. We illustrate our work with findings for ten metropolitan areas in five states for changes in state corporate income taxes, local property taxes, the federal corporate income tax, an investment tax credit, interest rates, public capital stocks, output prices, and tax and regulatory policies affecting gross wages. It is clear from these simulations that a policy that is nominally the same everywhere will have repercussions that vary widely across regions and cities.     

Not My Taxes! Explaining Tax Resistance and its Implications for Australia's Welfare State

In discussing Australia's need to increase taxes to pay for future social security, Michael Keating worries that voters see taxes as a ‘burden’ and that ‘the link between taxation and citizenship has been broken’. This paper deals with the problem of tax resistance (preferring lower taxes even when tax cuts risk public services) for Australia's welfare state. First, I describe how two Australian fiscal institutions—a residual welfare system and visible income taxes—promote tax resistance among voters. Second, I draw on these insights to develop several explanations for tax resistance: voter self-interest, voter hostility to minorities, voter disengagement (low trust and lack of interest in politics), and individualistic attitudes. The main conclusion is that tax resistance in Australia is institutionalised, making it easier to mobilise interests around low taxes, and harder to advocate for alternatives. Results of multivariate analysis using AES 2004 data indicate that an ‘anti-tax coalition’ can build on three diverse publics; one of higher and middle-income earners attuned to self-interest, another hostile to welfare beneficiaries, and another ‘tuned out’ of politics and willing to support any call for tax cuts. Inevitably, the debate about the welfare state is shadowed by a debate about voter willingness to pay taxes that finance it.     

State Taxation, Exploration, and Production in the U.S. Oil Industry

Abstract How do firms in nonrenewable resource industries respond to changes in state taxes? This paper presents simulations of changes in state production (severance) tax policy on the timing of exploration and output in Wyoming. The framework developed allows for interactions between taxes levied by different levels of government. Results suggest that oil production is highly inelastic with respect to changes in production taxes. Policy implications suggest that increases in production taxes on oil risk little loss in future production. The extent to which these results may generalize to other oil producing states is considered. JEL Codes: H71, Q32     

Who Pays the Costs of Inflation?

Inflation may be looked upon as a deferred consumption tax which reduces consumer purchasing power through high prices to compensate for earlier excess expansions of credit. A portion of this excess borrowing is by government to finance deficits. The inflation cost may then be compared by family–income class with the alternative income taxes needed to avoid inflation by eliminating the deficits. By this calculation for 1965–75, the inflation cost was highly regressive, with an effective rate of 17 percent on. families below $5,000, and 17 times greater than such families would have had to pay in income taxes. Meantime, the effective inflationary tax rate for wealthy families over $50,000 in income was a bonus, or tax rebate, of one percent.     

WHAT DO BUSINESS CLIMATE INDEXES TEACH US ABOUT STATE POLICY AND ECONOMIC GROWTH?*

ABSTRACT State business climate indexes capture state policies that might affect economic growth. State rankings in these indexes vary wildly, raising questions about what the indexes measure and which policies are important for growth. Indexes focused on productivity do not predict economic growth, while indexes emphasizing taxes and costs predict growth of employment, wages, and output. Analysis of sub‐indexes of the tax‐and‐cost‐related indexes points to two policy factors associated with faster growth: less spending on welfare and transfer payments; and more uniform and simpler corporate tax structures. But factors beyond the control of policy have a stronger relationship with economic growth.     

A NOTE ON INCOME TAXES AND DEGREE ONE PRODUCTION HOMOGENEITY*

ABSTRACT In a recent JRS article [Martinich and Hurter (1985)] we examined the production and spatial impact on a firm operating in an uncertain environment due to the imposition of a flat rate income tax. The impacts were shown to depend on the properties of the firm's production and preference functions. In this paper we develop further results for the case where the firm has a degree one homogeneous production function. It is shown that an income tax is technologically and spatially neutral for any risk-averse firm, without regard to any other properties of the preference function. Thus, we not only extend our earlier results for the degree one homogenous production function case but we also correct an error related to this case in the earlier paper.     

EXTERNALITIES AND PARTIAL TAX REFORM: DOES IT MAKE SENSE TO TAX ROAD FREIGHT (BUT NOT PASSENGER) TRANSPORT?*

ABSTRACT Externalities such as pollution and road congestion are jointly produced by the use of intermediate inputs by firms and the consumption of final goods by households. To cope with such externalities, policy proposals often suggest partial tax reforms. This paper uses a simple general equilibrium model to explore the effects of a reform of taxes on freight transport in a second‐best setting. The theoretical model shows that the welfare effect of higher freight taxes is positive, unless passenger transport is severely under‐taxed and the tax reform attracts substantially more passenger transport. Moreover, the optimal freight tax may be below or above marginal external cost. Budgetary neutral tax reform exercises with a numerical simulation model for the U.K. suggest that, under a wide variety of parameter values, higher freight transport taxes are indeed welfare increasing. The welfare gain of freight tax reform rises with the level of the passenger tax, but the optimal freight tax declines at higher taxes on passenger transport. Substantial net benefits of tax reform are obtained only under labor tax recycling of the revenues.     

Tradeoffs between Local Taxes and Government Spending as Determinants of Business Location*

Abstract. This paper investigates the effects of local fiscal policy on the location decisions of 3,763 establishments that began operations in Maine between 1993 and 1995. Empirical results, estimated from Poisson and negative binomial regression models, indicate that businesses favor municipalities that spend high amounts on public goods and services, even when these expenditures are financed by an increase in local taxes. This suggests that a local fiscal policy of reduced government spending, to balance a tax cut, may attract fewer new businesses than a policy featuring additional spending and higher taxes.     

INFLATION, PROGRESSIVITY, AND STATE INCOME TAX REVENUES

The combination of progressive income tax structures and inflation has led to significant increases in state income tax revenues. While the federal government has de facto indexed the federal personal income tax, states have generated large relative and absolute increases in their income tax revenues. This paper shows that the ratio of income tax revenues to personal income has grown significantly more in states with progressive income tax structures than those with proportional tax structures. Almost half of such increases may be attributed to inflation. The increase in the relative share of income tax as a source of state revenues has recently run into resistance in some states which have installed income tax indexation measures. This may suggest that the marginal cost of raising revenue through inflation, relative to other means (taxes), is reaching its limits.     

Trade policy,climate change and the greening of business

There is under way a worldwide greening of industry, driven by the huge demand generated by China and India as emerging industrial giants whose growth cannot be accommodated by ‘business as usual’ fossil-fuelled development—for reasons having as much to do with energy security as concerns over global warming and climate change. While the role played in this process by fiscal and industry policies (e.g. carbon taxes and other market-based incentives) is well understood (even if not pursued currently in Australia), the potentially powerful leverage to be exercised by trade policy is under-recognised. There are some positive developments such as a proposed Environmental Goods Agreement being discussed in Geneva, while there are negative developments embodied in various bilateral and regional trade agreements such as the proposed Trans-Pacific Partnership (TPP) agreement, to which Australia has committed itself. There are rising levels of conflict over trade and climate change mitigation measures, in actions brought at the WTO against countries looking to promote green industries through measures like local content requirements being attached to foreign direct investment, or by countries imposing border tax adjustments against exporters who allegedly fail to implement carbon taxes. The issues involved are discussed in this paper and possible ways forward are proposed, along with some implications for Australia.     

Controlling Forum Choice and Controlling Policy: Congress,Courts and the IRS

Considerable scholarly attention has been paid to litigation and its influence on social and bureaucratic policy. One area of research has focused on interest group litigation. Another area of scholarship has shown that Congress encourages individual use of the courts to monitor and control bureaucratic behavior. In several areas of law, litigants have a choice of forum by deliberate legislative design, which is sometimes derided as “forum shopping.” Little attention has been paid to the dominant national political coalition's ability to encourage forum shopping through legislation and the appointment process. One area of law that the coalition can encourage forum shopping is in challenging tax audits. It can do so through implict legislative signals and the appointment process to influence litigants to sue the Internal Revenue Service in the forum that offers the litigant the greatest chance of success. Given the prominent role of courts in setting and determining policy and given the particular prominence of taxes and tax policy over the past three decades, whether and where tax litigants choose to sue is critically important to understanding the dynamics of both tax policy and tax enforcement, as well as public policy creation and change. To demonstrate the influence of political forces on tax forum choice, I compare tax and district court filings from 1994 through to 2000. I find that as the Tax Court and national political coalition become more conservative, more taxpayers sue in the Tax Court and this “forum shopping” choice is supported by the national political coalition.     

LEADERS,FOLLOWERS, AND ASYMMETRIC LOCAL TAX POLICY DIFFUSION

Complementing recent theoretical models of tax competition with endogenous leadership, we empirically model local policy diffusion as a dynamic asymmetric process. Using a setting where local option sales taxes rapidly transitioned from nonexistence to ubiquity, we construct a policy leadership index to classify jurisdictions as leaders or followers. Using models that control for vertical tax competition effects, we show how asymmetric leader–follower dynamics characterize horizontal tax competition over the three decades that follow. A placebo test further supports our main conclusions. This methodological approach could be adapted to other settings where policies exhibit both extensive and intensive margins.     

Regulating Local Tax Abatement Policies

This article addresses several questions about property tax. abatements in the United States, all directed at why tax abatements should be regulated more closely, and one question about how this might be accomplished. First, are tax abatements “job increment financing” since they are exchanged for future jobs? Public decisionmakers assume that jobs mean tax revenues, but problems emerge when abatements are granted without knowledge of expected jobs, or if local government administrators and planners have no means of holding businesses accountable if their promises are not kept. Second, are local decisionmakers behaving imprudently when they abate multiyear taxes? Using abatements may not always be a particularly prudent way of using public resources. Third, can tax abatements undermine local democracy? Abatements weaken public involvement in city government when citizens have few opportunities to debate decisionmakers about tax exemptions, but they should have such a chance because abatements have costly, longlasting effects on current and future citizens. Fourth, do abatements create social costs? Tax abatements generate external effects for those who are not party to the politics of tax exemptions, but there are no easy answers about how to correct the externalities. Finally, what are the options for stopping tax abatements? These include federal prohibition, cooperative agreements, federal fiscal incentives, the courts, tougher negotiating tactics, and more stringent contractual provisions by urban planners and administrators.     

THE MARKET VALUE OF ENVIRONMENTAL IMPROVEMENTS IN ALTERNATIVE FISCAL REGIMES*

ABSTRACT Land price differentials have long been used as a proxy for the value of environmental improvements in cost/benefit analysis. Both the empirical and theoretical literatures have largely ignored two important facts, however: Taxes financing local improvements are often distortionary, and amenities which influence property values in turn impact the fiscal budget, and hence the tax rate and final economic burden. Put another way, the economic cost of an improvement is endogenous to both the amenity level and the revenue structure. Extending the story in this direction for a system of open or closed spatial cities, the paper finds land rent measures to be a biased measure of the willingness to pay for amenities financed by either head taxes (benefit taxes), property taxes (excise taxes), or highway tolls (user fees). These results are used to correct the conventional specification of empirical property value regression models, which traditionally account for neither tax revenue effects nor the excess burden of distortionary taxation.     

SPATIAL COMPETITION,PRICING, AND MARKET POWER IN TRANSPORTATION: A DOMINANT FIRM MODEL*

ABSTRACT Transport firms compete over space. We develop a dominant firm model of transport services wherein one firm (the railroad) has market power, but competes in space with a competitive alternative (truck‐barge). When constrained, the dominant firm prices to “beat the competition”, which impedes efficiency when demand has some elasticity. We extend the basic model in a number of directions that include the relationship between monopoly prices and the generalized concavity of the shipper demand functions, the effects of multiple terminal markets, the role of joint production (fronthaul–backhaul markets), and the effects of capacity constraints.     

THE EFFECTS OF TAXES,EXPENDITURES, AND PUBLIC INFRASTRUCTURE ON METROPOLITAN AREA EMPLOYMENT*

ABSTRACT. Data for 28 metropolitan areas over a 15-year period are used to determine the impacts of government spending, taxes, and public infrastructure on total employment and disaggregated employment. After carefully controlling for the government budget constraint we find that taxes are negatively related to total employment and education spending is positively related to total employment. Nevertheless, we find that it is difficult for metropolitan areas to influence the composition of their employment with government tax and expenditure policies. Moreover, at current levels of public infrastructure, marginal changes in infrastructure have no strong effect on employment.     

清末印花税的筹议与实施

印花税系晚清时期由西方国家传入中国的一大税种,在财政困绌、赔款筹措和洋务新政等因素的促动下,朝野人士多有论介,间或付诸实施,也因民间反对甚力,不免虎头蛇尾,成效未具.1906年鸦片禁政推行后,鸦片税厘开始缩减,为了抵补洋土药税收,度支部匆忙之间筹划研究,短时间内制定了印花税实施的有关章程,希图依靠该税筹措经费,达到抵补鸦片税的目的.无奈清末中央与地方财政关系复杂,民间反对甚烈,印花税不得不日渐式微,成效不大.     

GENERAL EQUILIBRIUM OF SPATIAL PRODUCT AND LABOR MARKETS*

ABSTRACT A simple general equilibrium model relates spatial product markets and spatial labor markets. The firm is treated as being a spatial monopolist or as a Löschian competitor in the output market and as a spatial monopsonist in the labor market. Derived free spatial demand and free regional labor supply are defined, and their properties examined. The model provides the framework for analyzing the impact of a technological improvement in labor productivity on the structure of the spatial markets. The impact of entry on spatial labor supply is an important determinant of whether or not entry lowers wages and raises output prices. Unlike the spaceless competitive paradigm, zero-profit long-run equilibrium can occur in a space economy under conditions of increasing returns to scale.     

THE IMPACT OF MARGINAL BUSINESS TAXES ON STATE MANUFACTURING

We estimate the impact of manufacturer business taxes on value added during the 1990s for 15 manufacturing sectors in 20 U.S. states. When the tax climate is properly measured as the potential liability arising from new investment in a state, we estimate that a 10 percent reduction in the effective tax liability is associated with a 3.5 to 5.3 percent increase in value added for the state's targeted manufacturing industry. When we isolate the value of industrial incentives from the basic tax system in our theoretically preferred marginal tax measure, we find that a 10 percent reduction in liability achieved by way of lowering taxes is associated with a 4.5 percent increase in value added while an equivalent reduction achieved by way of increasing incentives is associated with only 1.2 percent industrial growth, the latter elasticity not statistically different from zero.     

民国时期地方税收权力的流失——以1939—1949年重庆营业税为中心的考察

抗战全面爆发以后,重庆由四川省辖市升级为院辖市,逐步建立起独立的地方财政税收制度。作为地方税收的大宗,营业税本是重庆市政府增加财政收入的重要途径,但是,重庆市营业税权力却遭到四川省政府、中央政府、重庆市商人团体和参议会的分割、侵蚀而流失。以营业税为主的地方税收权力大量流失,直接导致地方财政困乏,也是影响国家政权稳定的重要因素之一。