Vertical Externalities in Tax Setting: Evidence from Gasoline and Cigarettes / Timothy J. Besley, Harvey S. Rosen.

Format:

Book

Author/Creator:

Besley, Timothy.

Contributor:

Rosen, Harvey S.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6517.

NBER working paper series no. w6517

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Vertical Externalities in Tax Setting

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

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.

Notes:

March 1999.

Print version record