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Are state governments revenue maximizers? Evidence from the sales tax

Author

Listed:
  • Joylynn Pruitt

    (West Virginia University)

  • Joshua C. Hall

    (West Virginia University)

Abstract

Analyses of interjurisdictional competition have extensively proved the presence of competition between local governments and the constraining effect of federalism or fiscal decentralization on government size. Few papers have applied local-level theories to the state level, despite the applicability of such theories to larger subnational governments. We apply a Leviathan model of government to state level sales taxes to determine whether states set sales tax rates according to the revenue maximizing rate. We find that states consistently set sales tax rates lower than the rate a Leviathan government would implement.

Suggested Citation

  • Joylynn Pruitt & Joshua C. Hall, 2017. "Are state governments revenue maximizers? Evidence from the sales tax," Economics Bulletin, AccessEcon, vol. 37(4), pages 2945-2950.
    • Handle: RePEc:ebl:ecbull:eb-16-00858
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    fiscal decentralization; Leviathan; tax competition; Laffer curve;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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