John L. Mikesell

Election periods and state tax policy cycles

Conclusions and implicationsThe policy and political outcomes that can be fruitfully studied using the electoral period as an analytic foundation range broadly. The present research has shown that much of the pattern of state tax policy change can be traced directly to that source. It suggests strongly that state parties are concerned with gaining and retaining political power and that the severity of public reaction declines with the passage of time. The outcome is a distinct rate change cycle with the broad based taxes.Beyond the apparent conclusion that tax reform efforts should be directed toward the first year of a gubernatorial term, there are some additional implications relating to other questions. First, the findings may help explain the relationship reported independently by Oates (1975, p. 150) and Goetz (1977, p. 184) that state governments with more income-elastic tax structures increase expenditure per capita by greater amount than those with less elastic structures. Politically, state governments find it rational to increase statutory rates of major taxes at two points in the election cycle (Yl-3 and Yl-1). A more elastic tax structure can provide greater funding between these politically attractive tax points.Another implication of the analysis is that the pattern of state tax policy changes may be economically destabilizing. The study clearly demonstrates the higher frequency of activity in the Yl-;3 and Yl-1 years. At the same time, a large number of states are on a 1974–1978 election cycle. Certain years are thus particularly likely to show major state tax increases, for certain reasons that have nothing to do with national aggregate demand policy. Fiscal policy, thus, must be prepared to counteract this potentially destabilizing force external to normal federal control.A final implication relates directly to state budgets. Some years are more likely to show new funds available for public programs because of the tax policy-electoral period cycle. These years will be substantially more attractive for budget expansion than would be others. Agencies subjected to zero base review in those years or proposing major new expenditure initiatives then may be expected to fare better than in other years.

The economic consequences of state lotteries

Preface State Lotteries: Past and Present Who Bears the Burden of State Lotteries? Lottery Tax Efficiency Lottery Taxes and Other Tax Revenue Where Are Lottery Dollars Coming From? A Comparison of Consumer Expenditures Before and After the Lottery Conclusions, Policy Recommendations, and Further Research Appendix Bibliography Index

The American Retail Sales Tax: Considerations on Their Structure, Operations, and Potential as a Foundation for a Federal Sales Tax

Argues that the credit-invoice VAT is preferable to a state and local-type retail sales tax as a choice for a national indirect consumption tax. The retail tax is poorly designed, taxes too few services, exempts too many purchases of goods, and taxes too many business inputs, especially capitol asset purchases.

Variation in Property Tax Abatement Programs Among States

This research provides an exhaustive review of U.S. property tax abatement programs and identifies and compares critical structural differences of abatement programs across states. Program differences are much greater than the existing literature recognizes. As a result, perhaps the most comprehensive database on the diversity of property tax abatements is offered to practitioners who are considering the design of a new abatement program or the revision of an existing one, as well as to researchers interested in furthering research on the effectiveness of this policy tool. For each of the identified abatement program features, advantages and disadvantages are discussed in light of existing literature.

Developing Options for the Administration of Local Taxes: An International Review*

Do decentralization arguments extend to administration of subnational taxes? While centralized administration promises quality service at reasonable cost, it may dull accountability and slow the revenue flow. Also, central administration may devote less attention to collecting these taxes than for its own. Self-administration brings administration closer to taxpayers and assures representation of jurisdictional interests in revenue apportionment disputes. However, subnational governments may lack technical capacity. That is the dilemma: while the central administration may be indifferent to rigorous collection of subnational taxes, subnational governments may lack capacity for self-administration. In practice, nations use many different alternatives for administering subnational taxes.

State Lotteries for Public Revenue

Lotteries, the state fiscal gimmick of the eighties, operate in jurisdictions encompassing substantially more than half the nations population and enjoy considerable public acceptance. The revenue they generate is small, rarely more than two percent of state general revenue, it is subject to major year-to-year swings, and it is very expensive to generate, particularly when vendor commissions are recognized as part of cost. Furthermore, lotteries bear a high implicit excise tax rate and, because of the pattern of play across income classes, appears to worsen the overall equity of the revenue system. Their economic impact appears to be that of an internal transfer, although states with major lottery equipment suppliers have most to gain, particularly if they do not operate their own lottery. Lotteries are not destined to become mainstays of government finance, although their spread is likely, even with the fiscal questions they raise.

Impact of the Sales Tax Rate on its Base: Evidence from a Small Town

Local governments and businesses fear that increased local sales tax rates will induce losses to the local economy, even inducing losses so severe that no additional revenue will result from a higher tax rate. Earlier works by Fisher, Hamovitch, and Mikesell have examined sales loss in metropolitan areas, typically finding significant but not overwhelming effects. Those results do not address the question for small cities and typically are complicated by the expenditure effects resulting from the increased tax revenues. The present analysis uses unique data for a small town to examine the impact of a temporary sales tax rate increase with a retail sales share model. The evidence shows a significant but small sales impact that did not endure (a differential of 1% would lower city sales by 3.07%) and no impact on vendor location. The unfavorable rate differential produced a short-run effect, but not economic disaster.

Property Tax Reassessment Cycles: Significance for Uniformity and Effective Rates:

Assessment cycles establish the points at which assessors are legally presumed to revalue property in their jurisdictions so that property tax burdens may be reallocated The operation, logic, and effects of existing cycles have, however, largely been ignored in analysis, even as attacks on property taxation, including the Jarvis-Gann initiative, drastically revise these cycles and their valuation presumptions. This article identifies cycles found in the United States and, on the basis of empirical analysis, concludes that specific cycles improve assess ment uniformity when compared with a general requrrement of annual assess ment, that reassessment improves tax uniformity, and that increased assess ment ratios with reassessment has mixed impact on effective tax rates.

Tax Expenditure Budgets, Budget Policy, and Tax Policy: Confusion in the States

A tax expenditure budget should contribute to efficient and effective public decisions by quantifying the division in the tax structure between provisions that represent revenue policy (distribute the cost of government according to the legislated tax base) and parts that represent budget policy (substitute for direct spending). For this transparency to have the desired impact, however, the tax expenditure budget process and the direct expenditure process must be properly integrated and the tax expenditure budget must make an accurate division between the parts of the tax structure. A review of the 33 states with tax expenditure systems shows many weaknesses in application of the concept and poor linkage to the direct spending budget system. Their most significant flaw is in dividing the tax structure into normal and preference elements; states need greater attention to defining their basic tax structure if they are to have a meaningful tax expenditure budget.

Lottery expenditure in a non-lottery state

One of the major arguments for legalization of lotteries in new jurisdictions in the United States has been the fact that neighboring states, with their own lotteries, have captured lottery purchases from the other jurisdictions citizens. This paper explores the issue by examining lottery purchase patterns in the state of Indiana prior to the start-up of the Indiana lottery, at a time when three adjacent states offered a variety of lottery product. Tobit analysis is also done on survey data to determine important contributing factors to the decision to play the lottery, as well as individual lottery expenditures. The paper concludes that, even though lottery revenues for a state are regressive, legalization might be justified on the basis of reducing the regressive outflow of revenue to bordering lottery states.