Tax Interdependence in American States

No 56, Econometric Society 2004 North American Winter Meetings from Econometric Society

Abstract: State governments finance their expenditures with multiple tax instruments, so when collections from one source decline, they are typically compensated by greater revenues from other sources. This paper addresses the important question of the extent to which personal and corporate income taxes are used to compensate for sales tax fluctuations within the US states. The results show that a one percent increase in the sales tax rate is associated with a half and a third percent decrease in the personal and corporate income tax rates respectively. In terms of tax revenues per capita, the results show that a one percent increase in the sales tax revenue per capita is associated with a 3 percent and a 0.9 percent decrease in the corporate and personal tax revenue per capita respectively

Keywords: Tax Mix; State Taxes; Tax Interdependence (search for similar items in EconPapers)
JEL-codes: H21 H71 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-pbe and nep-pub
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Working Paper: Tax Interdependence in American States (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:nawm04:56

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