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Federal Deductibility of State and Local Taxes: A Test of Public Choiceby Representative Government

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  • Lawrence B. Lindsey

Abstract

This paper considers the impact of federal deductibility on the level and composition of state and local taxes. It also considers the importance of deductibility in determining the vote of state Congressional delegations on the Tax Reform Act of 1986. Particular emphasis should be placed on the mechanism by which voter preferences are translated into public choices. Alternative measures of tax price are considered; each represents a different model of voter behavior. The paper concludes that tax levels are determined by an equal weighting of voters, not by a planning mechanism which minimizes the cost of revenue statewide. It also concludes that the issue of state and local deductibility played a negligible role in determining Congressional votes on the recent tax reform bill.

Suggested Citation

  • Lawrence B. Lindsey, 1987. "Federal Deductibility of State and Local Taxes: A Test of Public Choiceby Representative Government," NBER Working Papers 2292, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2292
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    1. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
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    Cited by:

    1. Alberto Sole Olle, 1998. "The effects of tax deductibility on the mix of property taxes and use charges: an empirical analysis of the spanish case," Working Papers in Economics 41, Universitat de Barcelona. Espai de Recerca en Economia.

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