Diversifying Municipal Revenue in Connecticut Report Prepared for the Connecticut Tax Study Panel Presentation November 17, 2015 David L. Sjoquist Professor of Economics Andrew Young School of Policy Studies Georgia State University Atlanta
Arguments against Revenue Diversification
Download 1.02 Mb.
|
- Navigate this page:
- Local Sales Taxes
- Table 2. Local Sales Tax Revenue as a Percentage of Local Tax Revenue, 2012
Arguments against Revenue DiversificationThere are two principal counter arguments against a diversified revenue structure. First, Hamilton (1975) (see also Fischel 2001) advanced a theory that the property tax is a benefit tax, and thus is an ideal tax for local governments. In essence, the premise is that local jurisdictions offer alternative tax-public service packages and that households choose among the jurisdictions based on the household’s most preferred package. Thus, the property tax liability is equal to the benefits a household receives from the public services that the local government provides. In this world, the property tax is essentially the price that a resident pays for the public services that are provided. However, others, for example Zodrow (2001), argue that this theory is not supported by empirical evidence. A more ad hoc argument is that the benefits of public services such as police protection, fire service, and streets networks are positively associated with the value of one’s property and thus with property taxes paid. The second argument against local revenue diversification is that if a local government gains access to additional revenue options, it will increase revenue, and thus expenditures, beyond what the citizen truly desire. There are several reasons why this might happen, but the main argument is based on the Leviathan view of government, as espoused by Buchanan (1967) and Buchanan and Wagner (1977). Under this view government decision makers are assumed to determine expenditure levels with little regards to the preferences of voters. Furthermore, it is assumed that the government bureaucrats prefer greater public spending than the citizens. Government bureaucrats, the argument goes, are able to increase expenditures since more revenue instruments leads to a more complex tax structure, which allows greater manipulation of voters by government officials. The empirical evidence of the effect of the revenue structure on the level of expenditures is mixed; see for example Wagner (1976), who found support for this view of government, and Ladd and Weist (1987), who obtain contrary results.10 Another reason for not adopting local sales or income taxes is that property tax revenue is less cyclical than income tax and sales tax revenue. This is in large part due to the ability to adjust the property tax rate in response to changes in the property tax base. The property tax base is also less responsive to changes in the tax rate than the sales tax and income tax bases. The property tax base responds slowly to changes in the property tax rate, particularly in the short run, because property is hard to move geographically. Local Sales TaxesReliance on Local Sales TaxesThe Census Bureau reports that as of 2012, local governments in 34 states, plus the District of Columbia, relied on sales taxes (Table 2). The reliance on local sales taxes varies widely among these 34 states, as reflected in local sales tax revenue as a share of local tax revenue, which ranged from 1.6 percent to 48.5 percent (Table 2). The difference in reliance on the sales tax reflect differences in the percentage of local governments in the state that employ a local sales tax and the local sales tax rates. Table 2. Local Sales Tax Revenue as a Percentage of Local Tax Revenue, 2012
Directory: wp-content -> uploads -> 2016 2016 -> 2017 afoCo Landmark Scholarship Program 2016 -> Instructions for the Preparation of Camera-Ready Contributions to the Conference Proceedings 2016 -> Step student Scholarships for Year 10-13 2016 -> The united church of canada 2016 -> Idan raichel biography – May 2016 Brief Producer, keyboardist, Lyricist, composer and Performer Idan Raichel 2016 -> An introduction to centre’s interventions expanding access to justice 2016 -> Sanchar Shakti 2016 -> Unit analysis should help here. We want number of bananas 2016 -> The Autobiography of Elder Joseph Bates 2016 -> The Great Heat and the Rhode Island Deep Water Bay Scallop (Argopecten irradians) Fishery 1875-1905 Download 1.02 Mb. Share with your friends:
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||