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Tax Exporting, Federal Deductibility, and State Tax Structure

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  • Gilbert E. Metcalf

Abstract

This paper studies the interaction between the federal and state tax systems during the 1980s and in particular considers how the Tax Reform Act of 1986 affected state tax structure. Using a panel data set on state governments over a nine year period, I estimate tax share equations for six categories of taxes. I find that the state personal income tax is sensitive to changes in its tax price but find a much smaller sensitivity to changes in tax prices for the general sales tax. I then consider various reasons for why the sales tax does not exhibit a sensitivity to changes in tax price and consider the implications of these results for policy makers.

Suggested Citation

  • Gilbert E. Metcalf, 1991. "Tax Exporting, Federal Deductibility, and State Tax Structure," NBER Working Papers 3839, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3839
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    1. Courant, Paul N & Rubinfeld, Daniel L, 1987. "Tax Reform: Implications for the State-Local Public Sector," Journal of Economic Perspectives, American Economic Association, vol. 1(1), pages 87-100, Summer.
    2. Pollock, Stephen H., 1991. "Mechanisms for Exporting the State Sales Tax Burden in the Absence of Federal Deductibility," National Tax Journal, National Tax Association, vol. 44(3), pages 297-310, September.
    3. Metcalf, Gilbert E., 1992. "Deductibility and optimal state and local fiscal policy," Economics Letters, Elsevier, vol. 39(2), pages 217-221, June.
    4. Douglas Holtz-Eakin & Harvey S . Rosen, 1988. "Tax Deductibility and Municipal Budget Structure," NBER Chapters, in: Fiscal Federalism: Quantitative Studies, pages 107-136, National Bureau of Economic Research, Inc.
    5. Metcalf, G.E., 1991. "The Role Of Federal Taxation In The Supply Of Municipal Bonds: Evidence From Municipal Governments," Papers 72, Princeton, Woodrow Wilson School - John M. Olin Program.
    6. Pollock, Stephen H., 1991. "Mechanisms for Exporting the State Sales Tax Burden in the Absence of Federal Deductibility," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(3), pages 297-310, September.
    7. Feldstein, Martin S & Metcalf, Gilbert E, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 710-736, August.
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    13. Lawrence Lindsey, 1988. "Federal Deductibility of State and Local Taxes: A Test of Public Choice by Representative Government," NBER Chapters, in: Fiscal Federalism: Quantitative Studies, pages 137-176, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Zsolt Becsi, 1998. "Fiscal competition and reality: A time series approach," FRB Atlanta Working Paper 98-19, Federal Reserve Bank of Atlanta.
    2. Lars P Feld & Friedrich Schneider, 2000. "State and local taxation," Economics working papers 2000-05, Department of Economics, Johannes Kepler University Linz, Austria.
    3. Whitney B. Afonso & Jeremy G. Moulton, 2024. "Local sales tax exportation: The impact of commuters, tourists, and college students on the tax base," Public Budgeting & Finance, Wiley Blackwell, vol. 44(1), pages 38-59, March.
    4. Holtz-Eakin, Douglas, 1996. "Fundamental Tax Reform and State and Local Governments," National Tax Journal, National Tax Association, vol. 49(3), pages 475-86, September.
    5. Inman, Robert P. & Rubinfeld, Daniel L., 1996. "Designing tax policy in federalist economies: An overview," Journal of Public Economics, Elsevier, vol. 60(3), pages 307-334, June.
    6. Holtz-Eakin, Douglas, 1996. "Fundamental Tax Reform and State and Local Governments," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(3), pages 475-486, September.
    7. John M. Foster, 2014. "Tax Exporting and the Business Share of Sales Tax Levies," Public Budgeting & Finance, Wiley Blackwell, vol. 34(4), pages 80-99, December.

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