Gubernatorial Reputation and Vertical Tax Externalities: All Smoke, No Fire?

Per Fredriksson and Khawaja Saeed Mamun
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Per Fredriksson: University of Louisville

No 2009002, Working Papers from Sacred Heart University, John F. Welch College of Business

Abstract: This paper investigates whether reputation-building strategies guide U.S. governors’ responses to changes in federal cigarette taxes (i.e. vertical tax interactions). Using 1975-2000 state cigarette tax data, we find that reputation-building strategies affect the nature of vertical tax externalities. Lame duck governors exhibit a more negative response to changes in the federal cigarette tax. Thus, by reducing the state tax base and by causing a decline in the state tax, an increase in the federal tax rate reduces state tax revenues in states headed by lame ducks.

Keywords: Vertical Tax Interactions; Fiscal Federalism; Reputation-building; Electoral Accountability; Political Institutions (search for similar items in EconPapers)
JEL-codes: H71 H77 D72 D78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-ure
Date: 2009-10
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http://repec.sacredheart.edu/she/pdf/wp2009_002.pdf First version, 2009 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:she:wpaper:2009002

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