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The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest

Author

Listed:
  • William H. Oakland

    (Tulane University)

  • William A. Testa

    (Federal Reserve Bank of Chicago)

Abstract

State-local tax policies to encourage growth and development have been roundly criticized as detrimental to social welfare. In response, recent proposals have included delimiting the ability of states and localities to fashion tax policies. Not only are such proposals unworkable, but they fail to harness the creative energy and ideas of development practitioners because they act competitively to foster growth and development. The authors propose an alternative basis on which to fashion state-local taxation of business—that is, the so-called benefit principle—which aligns business taxes with costs of government services received by business entities.

Suggested Citation

  • William H. Oakland & William A. Testa, 2000. "The Benefit Principle as a Preferred Approach to Taxing Business in the Midwest," Economic Development Quarterly, , vol. 14(2), pages 154-164, May.
    • Handle: RePEc:sae:ecdequ:v:14:y:2000:i:2:p:154-164
    DOI: 10.1177/089124240001400203
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    References listed on IDEAS

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    1. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70(3), pages 215-215.
    2. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
    3. Kitchen, H.M. & Slack, E., 1993. "Business Property Taxation," Papers 93-24, Queen's at Kingston - School of Policy Studies.
    4. Kenyon, Daphne A., 1996. "A New State VAT? Lessons From New Hampshire," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(3), pages 381-399, September.
    5. Timothy J. Bartik, 1991. "The Effects of Property Taxes and Other Local Policies on the Intrametropolitan Pattern of Business Location," Book chapters authored by Upjohn Institute researchers, in: Henry W. Herzog & Alan M Schlottmann (ed.),Industry Location and Public Policy, pages 57-80, W.E. Upjohn Institute for Employment Research.
    6. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
    7. Kenyon, Daphne A., 1996. "A New State VAT? Lessons From New Hampshire," National Tax Journal, National Tax Association, vol. 49(3), pages 381-99, September.
    8. William H. Oakland & William A. Testa, 1996. "State-local business taxation and the benefits principle," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 20(Jan), pages 2-19.
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    Cited by:

    1. Timothy J. Bartik, 2004. "Evaluating the Impacts of Local Economic Development Policies on Local Economic Outcomes: What Has Been Done and What Is Doable?," Book chapters authored by Upjohn Institute researchers, in: Evaluating Local Economic and Employment Development: How to Access Waht Works Among Programmes and Policies, pages 113-142, W.E. Upjohn Institute for Employment Research.
    2. Drucker, Joshua & Funderburg, Richard & Merriman, David & Weber, Rachel, 2020. "Do local governments use business tax incentives to compensate for high business property taxes?," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    3. Richard M. Bird, 2014. "A Better Local Business Tax: The BVT," IMFG Papers 18, University of Toronto, Institute on Municipal Finance and Governance.

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