Economic Conditions and State Tax Policy: Experience over the Last Decade and Implications for the Future
نویسنده
چکیده
economic times, states often legislate tax increases to create additional revenues, even though standard macroeconomic theory suggests that doing so dampens economic activity. Over the last decade or so, state governments have taken on more responsibility for administering social welfare programs. Thanks to abundant federal aid, a robust national economy, and a decline in the number of participants in some social programs, most states have had the resources to fund social programs at or above historical levels. But what will states do when the economy inevitably slows down? Much can be learned from studying the past. Despite many important changes, the political, economic, and social forces that have shaped state policymaking for decades persist. In fact, the best predictors of states’ future policy choices are those they have made in the past. This brief reviews a decade’s worth of data on changes in state income and sales taxes, investigating how state tax policy has responded to the business cycle and discussing long-term trends in the relative use of the sales and income taxes from 1988 through 1998. Before this research, Dye and McGuire (1999) investigated the relationship between states’ real tax revenues and gross state products (GSP) from 1977 to 1996. They found that tax revenues increased and decreased less than proportionately with economic growth. On average, for the United States as a whole, a 1 percent increase in GSP was associated with only a 0.27 percent increase in sales tax revenues and only a 0.66 percent increase in income tax revenues. Dye and McGuire (1999) “infer from these results that the positive relationship between the bases of the various taxes and GSP . . . is greatly muted [by policy changes].” Inference is necessary because Dye and McGuire did not have access to direct evidence about tax policy changes.
منابع مشابه
Economic Assessment of Carbon Tax policy: Applied Computable General Equilibrium Model
Unbalanced use of fossil fuels has made the environmental crisis as major challenge for governments. In the same methods, international and domestic institutions have designed and implemented various policies and plans to reduce greenhouse gas emissions, which are the cause of environmental pollution. One of the successful policies to reduce emissions is carbon tax policy. Considering the envir...
متن کاملEconomic Assessment of Carbon Tax policy: Applied Computable General Equilibrium Model
Unbalanced use of fossil fuels has made the environmental crisis as major challenge for governments. In the same methods, international and domestic institutions have designed and implemented various policies and plans to reduce greenhouse gas emissions, which are the cause of environmental pollution. One of the successful policies to reduce emissions is carbon tax policy. Considering the envir...
متن کاملEvolution of the Asia-Pacific Trade Architecture: Stocktake and Future Outlook
APEC Study Centre, University of Auckland, Auckland, New Zealand    Abstract:  One of the key sets of questions underlying Asia Pacific economic cooperation over the last decade has been over the nature and form of the regional trade architecture that would gradually emerge from the turmoil of the Asia-Pacific ânoodle bowlâ of bilateral and plurilateral FTAs, and how that architecture...
متن کاملAssessing the Iranian Fiscal Sustainability in Past and Future through Tax Side of the Economy
This paper, I have focused on the tax side of the fiscal policy to investigate the past and future behavior of fiscal sustainability in Iran. To do so, I have employed two different forward-looking and backward-looking approaches. First, the backward-looking approach is the fiscal policy rule proposed by Daving & Leeper (2011). Precisely, this rule determines that whether the fiscal policy is ...
متن کاملAn Optimal Tax Relief Policy with Aligning Markov Chain and Dynamic Programming Approach
Abstract In this paper, Markov chain and dynamic programming were used to represent a suitable pattern for tax relief and tax evasion decrease based on tax earnings in Iran from 2005 to 2009. Results, by applying this model, showed that tax evasion were 6714 billion Rials**. With 4% relief to tax payers and by calculating present value of the received tax, it was reduced to 3108 billion Rials. ...
متن کامل