EconPapers    
Economics at your fingertips  
 

Behavioural patterns of leaders versus followers in setting local sales tax policy

Jongmin Shon and Yilin Hou

Fiscal Studies, 2025, vol. 46, issue 2, 281-296

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.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1475-5890.12395

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:fistud:v:46:y:2025:i:2:p:281-296

Access Statistics for this article

More articles in Fiscal Studies from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-07-02
Handle: RePEc:wly:fistud:v:46:y:2025:i:2:p:281-296