Economics at your fingertips  

Local sales taxes, employment, and tax competition

Shawn M. Rohlin and Jeffrey Thompson ()

Regional Science and Urban Economics, 2018, vol. 70, issue C, 373-383

Abstract: Most analysis of the economic impacts of sales taxes does not include local taxes, despite the fact that they account for one-fifth of all sales tax collections and vary widely across states. This paper addresses that omission, estimating the effect of sales taxes on employment at state borders using county-level quarterly data and a newly developed data set of local county tax rates. The findings indicate that sales tax increases, relative to cross-border neighbors, lead to losses of employment, as well as payroll and hiring, but these effects are only found in counties with large shares of residents working in another state. The employment effects are also likely to be relatively short-lived, as they occur in the period before tax competition occurs and competitive jurisdictions are able to strategically respond and minimize cross-border tax differentials. Comparing estimates of sales tax effects with and without local county sales taxes show that omitting county taxes does not lead to meaningfully different estimates.

Keywords: H2; H7; R5; Inter-state tax competition; Sales tax; Local taxes; Border models; Cross-border shopping (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

Regional Science and Urban Economics is currently edited by D.P McMillen and Y. Zenou

More articles in Regional Science and Urban Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-04-24
Handle: RePEc:eee:regeco:v:70:y:2018:i:c:p:373-383