Separation of Powers and the Tax Level in the U.S. States

Leandro de Magalhaes and Lucas Ferrero ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: We estimate a non-linear and discontinuous relationship between the tax level and the degree of alignment between the legislature and the governor, measured as the number of seats in the legislature that belong to the governor’s party. In the states with the line-item veto, there is a jump in the tax level at the point where the government switches from divided to unified. With a regression discontinuity design, we show that this jump can be interpreted as a causal effect. We propose a simple model to account for this non-linear relationship. The sequential nature of the budget bargaining game, i.e. the legislature proposes and the governor cuts with the line-item veto, implies that the tax level is determined by the overlap between the supporters of the governor and the supporters of the legislative majority. Changes in the size of the overlap determine the tax level.

Keywords: Separation of powers; divided government; line-item veto; tax level; semiparametric. (search for similar items in EconPapers)
JEL-codes: H00 H11 H20 H30 H71 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2010-10, Revised 2014-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in Southern Economic Journal.

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Journal Article: Separation of powers and the tax level in the U.S. states (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:14/620

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