 Local sales taxes, employment, and tax competitionShawn 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) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:70:y:2018:i:c:p:373-383 DOI: 10.1016/j.regsciurbeco.2017.10.012 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 |
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