Besley, Timothy 
ORCID: 0000-0002-8923-6372 and Rosen, HS
(1997)
Vertical externalities in tax setting: evidence from gasoline and cigarettes.
IFS working papers (W97/23).
Institute for Fiscal Studies (Great Britain), London, UK.
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 3.5-cent increase in the state tax rate.
| Item Type: | Monograph (Discussion Paper) |
|---|---|
| Official URL: | https://ifs.org.uk/research-and-analysis/working-p... |
| Additional Information: | © 1998 The Authors |
| Divisions: | LSE |
| Subjects: | H Social Sciences > HJ Public Finance |
| Date Deposited: | 27 Apr 2007 |
| Last Modified: | 11 Sep 2025 03:42 |
| URI: | http://eprints.lse.ac.uk/id/eprint/2314 |
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