Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions

Lingxiao Wang and Yuqing Zheng

Regional Science and Urban Economics, 2024, vol. 104, issue C

Abstract: Grocery food sales taxes (or grocery taxes) in the United States are applied in the form of a state and/or county tax. To investigate how local governments establish these grocery taxes, we develop a dynamic gaming model to explain the county–county and county–state interactions regarding grocery taxes. Leveraging novel panel data on grocery taxes at county and state levels from 2006 to 2017, we estimate a dynamic spatial model including multilevel governments. The empirical evidence unveils three key spatial determinants that contribute to variations in county grocery tax rates. (1) A negative vertical impact from the home state, (2) a positive horizontal effect from neighboring counties, and (3) a positive diagonal effect from neighboring states.

Keywords: Grocery sales taxes; Spatial tax competition; Multilevel government interaction; Commodity taxation (search for similar items in EconPapers)
JEL-codes: H25 H71 H73 H77 R50 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:104:y:2024:i:c:s0166046223000947

DOI: 10.1016/j.regsciurbeco.2023.103959

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