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.
Original language | English (US) |
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Pages (from-to) | 383-398 |
Number of pages | 16 |
Journal | Journal of Public Economics |
Volume | 70 |
Issue number | 3 |
DOIs | |
State | Published - Dec 1 1998 |
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
Keywords
- Cigarette taxes
- Gasoline taxes
- H23
- H72
- H73