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Unmasking Local Fiscal Responses to Federal Tax Deductibility

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  • David Coyne

Abstract

This paper analyzes how changes to the deductibility of state and local taxes under the federal personal income tax affect local fiscal outcomes. This paper is the first to study the impact of changing tax prices on local fiscal outcomes while allowing for local heterogeneity in tax incentives at the county level. Exploiting variation at the county level yields a more elastic relationship between tax price and local spending than using coarser units of observation. Simulations suggest that limiting the deduction for state and local taxes would not disproportionately hurt resource-poor areas, making such limits potentially progressive policy options.

Suggested Citation

  • David Coyne, 2017. "Unmasking Local Fiscal Responses to Federal Tax Deductibility," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(2), pages 223-256, June.
    • Handle: RePEc:ntj:journl:v:70:y:2017:i:1:p:223-256
    DOI: 10.17310/ntj.2017.2.01
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    Cited by:

    1. Ionela Munteanu & Flavius Valentin Jakubowicz, 2022. "A Bibliometric Analysis of Scientific Accounting Studies Concerning Fiscal Topics," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 920-926, Decembrie.
    2. Jeffrey Clemens & Stan Veuger, 2024. "Intergovernmental Grants and Policy Competition: Concepts, Institutions, and Evidence," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.

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