Besley, Timothy 
ORCID: 0000-0002-8923-6372 and Rosen, Harvey
(1998)
Vertical externalities in tax setting: evidence from gasoline and cigarettes.
Journal of Public Economics, 70 (3).
383 - 398.
ISSN 0047-2727
Abstract
A common feature of federal systems is that tax bases are joint property. Consequently, state and federal tax setting decisions are interdependent. Our aim here is to put forward a rudimentary theoretical analysis of this phenomenon, and to use the theory as a framework for econometrically estimating the magnitude of the responses. We find that when the federal government increases taxes, there is a significant positive response of state taxes. For example, a 10-cent per gallon increase in the federal tax rate on gasoline leads to a 3.2-cent increase in the state tax rate.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.sciencedirect.com/journal/journal-of-p... |
| Additional Information: | © 1998 Elsevier Science S.A. |
| Divisions: | LSE |
| Subjects: | H Social Sciences > HJ Public Finance |
| JEL classification: | H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H72 - State and Local Budget and Expenditures H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H73 - Interjurisdictional Differentials and Their Effects |
| Date Deposited: | 27 Apr 2007 |
| Last Modified: | 01 Nov 2024 05:13 |
| URI: | http://eprints.lse.ac.uk/id/eprint/1647 |
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