The fiscal impact of potential local option taxes in Massachusetts
Bo Zhao ()
No 10-2, New England Public Policy Center Working Paper from Federal Reserve Bank of Boston
This paper examines the potential impact of local-option taxes on meals, general sales, income, and payroll on revenue-raising capacity in Massachusetts municipalities. It finds that, while new local-option taxes would generate considerable additional revenues from untapped sources, revenue capacity is not evenly distributed across municipalities. Indeed, local-option taxes are likely to exacerbate fiscal disparities, because municipalities with low existing revenue-raising capacity often lack the tax bases for new local-option taxes. Policymakers could consider increasing equalizing state aid to offset these fiscal disparities. If more aid is not forthcoming, this paper proposes that the state change aid formulas to reflect differences across municipalities in local-option tax capacity, and to better target fiscally distressed communities. These strategies - explored in the Massachusetts context - could also be useful in other states.
Keywords: Taxation - Massachusetts; Local finance - Massachusetts (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-ure
Date: 2010, Revised 2010
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbcw:10-2
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in New England Public Policy Center Working Paper from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().