{"title":"Behavioural patterns of leaders versus followers in setting local sales tax policy","authors":"Jongmin Shon, Yilin Hou","doi":"10.1111/1475-5890.12395","DOIUrl":null,"url":null,"abstract":"<p>Sales tax has been a popular revenue source for local governments in 38 US states. In this fiscal climate, both horizontal and vertical tax competition are frequently observed. Local governments are concerned about adverse impacts thereof on their revenue as mobile shoppers react to tax rate changes by purchasing in lower-tax jurisdictions. So far, few studies have accounted for potential endogeneity in the behavioural patterns of leaders versus followers in setting local sales tax policy. Using a 40-year panel dataset from Texas, this study identifies leader municipalities in changing sales tax rates and examines how municipalities asymmetrically respond to multi-tiered rate changes. The findings depict a crowding-out story in vertical tax competition and reveal crowding-in effects in horizontal competition, with leader municipalities immune to both effects.</p>","PeriodicalId":51602,"journal":{"name":"Fiscal Studies","volume":"46 2","pages":"281-296"},"PeriodicalIF":2.2000,"publicationDate":"2024-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Fiscal Studies","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1475-5890.12395","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
Sales tax has been a popular revenue source for local governments in 38 US states. In this fiscal climate, both horizontal and vertical tax competition are frequently observed. Local governments are concerned about adverse impacts thereof on their revenue as mobile shoppers react to tax rate changes by purchasing in lower-tax jurisdictions. So far, few studies have accounted for potential endogeneity in the behavioural patterns of leaders versus followers in setting local sales tax policy. Using a 40-year panel dataset from Texas, this study identifies leader municipalities in changing sales tax rates and examines how municipalities asymmetrically respond to multi-tiered rate changes. The findings depict a crowding-out story in vertical tax competition and reveal crowding-in effects in horizontal competition, with leader municipalities immune to both effects.
期刊介绍：
The Institute for Fiscal Studies publishes the journal Fiscal Studies, which serves as a bridge between academic research and policy. This esteemed journal, established in 1979, has gained global recognition for its publication of high-quality and original research papers. The articles, authored by prominent academics, policymakers, and practitioners, are presented in an accessible format, ensuring a broad international readership.
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