Political Institutions and State Sales Tax Base Erosion

Propheter Geoffrey ()
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Propheter Geoffrey: New York City Independent Budget Office, 110 William St, 14th Floor, New York, NY 10038

Statistics, Politics and Policy, 2015, vol. 6, issue 1-2, 1-17

Abstract: The sales tax has long been hailed a workhouse of state and local public finance, but its future looks grim due in no small part to the continued proliferation of exemptions. While scholars have noted the role politics plays in eroding the sales tax base, no study has empirically investigated the matter. Using a panel of 44 states from 1980 to 2010, this study addresses this gap by exploring if states’ political institutions predict variations in the level and rate of sales tax base erosion. The models show that political institutions do not systematically determine base erosion in general; though, some factors such as gubernatorial election years and political competition are found to exert some influence. The implications of the study’s abundance of null findings are also discussed.

Date: 2015
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DOI: 10.1515/spp-2014-0001

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