Unintended Consequences of Local Sales Tax: Capitalization of Sales Taxes into Housing Prices

Local governments are under pressure to look for alternatives to property taxes as their main revenue source. One response has been to adopt local sales taxes. Prior studies offer little guidance on whether and how much local governments enhance their revenue capacity with local sales taxes. This article unveils the underlying mechanisms by exploring the capitalization of sales taxes into housing prices as a property tax base measure. The empirical analysis reveals a capitalization of local sales taxes into housing prices, indicating the reduction of property tax bases in higher sales tax areas from the long-term perspective. The findings suggest that a sales tax rate increase might not raise local revenue capacity as much as policymakers intend.     

Determinants of Performance Measurement: An Investigation into the Decision to Conduct Citizen Surveys

This article develops and tests a comprehensive framework explaining the decision to measure performance, specifically the decision of local governments to conduct citizen surveys. It is structured around a fundamental distinction between subjective performance measures obtained for use in decision making and those that are produced solely for their symbolic value. The author suggests that the field of public administration may be taking a simplified view concerning the promotion and adoption of citizen surveys, overlooking important aspects of the decision-making process of performance-oriented public managers and neglecting the impact of politics and symbols. Political rationality may undercut managerial rationality in the decision to adopt citizen surveys, and symbolic adoption may be the underlying cause of low levels of information use. This study identifies policies to increase adoption of citizen surveys but cautions that simply promoting the adoption of surveys as inherently good may be a naive and wasteful course of action. Practitioners who have already made the decision to measure subjective performance through citizen surveys, or are facing such a decision, can find in this analysis a structure to assess past decisions or guide future decisions.     

Tax exporting,federal deductibility,and state tax structure

This paper studies the interaction between the federal and state tax systems during the 1980s and, in particular, considers how the Tax Reform Act of 1986 affected state tax structure. Using a panel data set on state governments over a nine-year period, I estimate tax share equations for six categories of taxes. I find that the state personal income tax is sensitive to changes in its tax price, but find a much smaller sensitivity to changes in tax prices for the general sales tax. I then consider various reasons why the sales tax does not exhibit a sensitivity to changes in tax price and consider the implications of these results for policymakers. The regression results suggest that different income groups are concerned with different tax instruments. Moreover, the results motivate a possible benefit approach to taxation at the state level. Linking taxes, about which a particular income group is most concerned, to services received by that group might generate additional political support for state tax systems during a time when many states are facing fiscal crisis.     

Rational voting applied to choice of taxes

Fulton County (Atlanta, Georgia) conducted a referendum on a local option sales tax. The referendum offered voters an opportunity to substitute a 1% sales tax for an equal amount of property taxes. The precinct level voting patterns of the referendum are analyzed using a rational voter framework. The regression results generally support the implication of the model.     

Sales and Use Tax Simplification and Voluntary Compliance

Because of difficulties collecting sales taxes on Internet sales, several states have engaged in an effort (the Streamlined Sales Tax Project, SSTP) to simplify their sales tax systems. One hope among SSTP proponents is that a simplified system will result in Internet vendors voluntarily collecting the sales tax. We address two issues:

• ? Will states adopt the extensive reforms proposed by the SSTP?
• ? Will vendors voluntarily collect the sales tax?

We argue that states are unlikely to adopt extensive reforms, but if they did, many vendors would voluntarily collect sales taxes.     

Flatliners: Ideology and rational learning in the adoption of the flat tax

What factors explain the wave of adoption of the flat tax in Eastern Europe? It is argued in this article that, once the first few successes were underway, governments with liberal outlooks toward taxation adopted the reform through a process of rational learning: an often radically new government will tend to adopt the policy based on successful implementation of its neighbours. The issue of policy diffusion is approached by explicitly modeling the different mechanisms that might underlie the process. Little evidence is found for pure ‘bandwagoning’ in the adoption of the flat tax – the presence of other market‐minded reforms do not predict adoption of the flat tax, and contagion measures do not capture the dynamics of the adoption of the reform. Instead, rational learning, where economically right‐wing governments evaluated the success of the reform (as measured by their ability to attract foreign investment) in the medium term, plays the largest role. Rational emulation in a shorter time period contributes to the probability of adoption as well, as does a change to an economically liberal ideology.     

State budget stabilization fund adoption: Preparing for the next recession or circumventing fiscal constraints?

The high rate of budget stabilization fund adoption during the 1980s is often attributed to the 1980–1982 recession. In this view, states adopted funds to prevent a recurrence of the fiscal crises experienced during that recession. An alternative hypothesis is that some funds adopted during this period were intended to circumvent tax and expenditure limit laws. We find that states with TELs in place were significantly more likely to adopt statutory funds, but were significantly less likely to adopt funds with stringent deposit and withdrawal rules, suggesting that some funds were adopted to circumvent existing fiscal constraints.     

The political economy of sales taxes and sales tax exemptions

I analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or tax exemptions, given the constraint that politicians want to raise a certain amount of revenue. Using data on sales taxes, I develop a model predicting a positive relationship between the number of exemptions and the sales tax rate. The estimation results provide support for this prediction. Each additional exemption is associated with an increase of between 0.10 and 0.25 percentage points in the tax rate.

     

Advancing E‐Government at the Grassroots: Tortoise or Hare?

American grassroots governments have rushed to join the e-government revolution. Although there is a growing body of e-government literature, little of it is empirical. Using data from two nationwide surveys, we conduct a longitudinal examination of local government adoption of e-government, Web site sophistication, the perceived impacts of e-government, and barriers to the adoption and sophistication of e-government. We also discuss correlates of e-government adoption and sophistication with selected institutional factors. We find that e-government adoption at the grassroots is progressing rapidly (if measured solely by deployment of Web sites). However, the movement toward integrated and transactional e-government is progressing much more slowly. Continuing research, particularly longitudinal study, is needed to monitor the evolution of e-government among U.S. local governments, especially to keep pace with the practice and to ascertain the actual impacts of e-government.     

The Adoption of Local Option Fuel Taxes: Evidence From Florida Counties

This study examines the time to adoption of local option fuel taxes (LOFTs) among Florida counties from 1972 to 2015. Florida county governments are authorized to levy up to 12 cents of LOFTs in the form of three separate instruments. Using a Cox proportional hazards model, this study finds that additional LOFT instruments in place affect time to adoption and that the factors associated with the adoption of LOFTs differ from those of local option sales taxes. Additionally, there is evidence that suggests the legal structure of LOFTs affects both the time to adoption and the relationship with other LOFTs.     

Can Local Ordinances Prevent Neighborhood Destabilization?

This article assesses the ability of local housing ordinances to prevent neighborhood destabilization, specifically that arising as a consequence of the most recent housing crisis. We evaluate the degree to which vacancy registrations and point-of-sale inspection requirements influenced housing market outcomes during the housing crisis. With comprehensive real property data from Cuyahoga County, Ohio, we measure outcomes that characterize housing market distress including foreclosures, sales below the tax-assessed value, bulk sales, flipping, and property tax delinquency. We evaluate outcomes across properties in regulated and unregulated municipalities using matching procedures on linked data containing property, neighborhood, loan, and transaction characteristics. We find evidence that vacancy registrations substantially reduce foreclosures. In contrast, we find little evidence that point-of-sale inspections reduce undesirable transactions. Rather, properties in cities with inspection requirements displayed higher levels of foreclosure and tax delinquency relative to the control group during the study period.     

The role of tax bases and collections costs in the determination of income tax rates,seigniorage and inflation

A growing theoretical literature on optimal taxation predicts that governments will set the tax rates on money holdings and on more traditional tax bases to minimize the deadweight losses of collecting government revenue. Under the presumption that relative collection costs and tax bases have not changed significantly over time, the empirical time-series seigniorage literature has focused on the theory's tax smoothing implication, finding only weak support. We show that changes in collections costs and tax bases played an important role in the determination of tax composition and find stronger support for tax smoothing when this is taken into account.     

Devolution and Innovation: The Adoption of State Environmental Policy Innovations by Administrative Agencies

Do states act as laboratories for reform? Are state administrative agencies likely to adopt policy innovations? This study analyzes the adoption of environmental policy innovations by state administrative agencies in the area of hazardous waste regulation. Four explanations are developed to explain the factors that affect innovation adoption: the severity of the problem, the importance of institutional factors, the role played by interest groups, and contextual factors. Institutional factors, such as state wealth and administrative professionalism, are important determinants of innovation adoption. State agencies are also likely to adopt innovations to deal with problems created by hazardous waste contamination. In addition, state environmental managers are not directly influenced by interest groups, and the inclusion of all stakeholders is likely to lead to greater support for new policy initiatives. Implications for practitioners are drawn based on the study's findings.     

Cross‐Border Shopping and State Use Tax Liabilities: Evidence from eBay Transactions

Online commerce presents consumers with a convenient way of shopping outside of their local jurisdiction, and this online purchase decision is capable of affecting in significant ways the sales and use tax collections of state governments. However, the actual revenue impact has proven difficult to estimate. There is considerable work that examines the revenue impact of seller compliance with sales taxes. However, there is little work on buyer compliance with use taxes. In this paper, we investigate the potential impact of cross‐border shopping on state use tax liabilities of buyers, using data from the largest online consumer‐to‐consumer and business‐to‐consumer marketplace, eBay.com . We collect our own data on actual cross‐border shopping transactions from eBay, focusing upon a “representative” commodity classification and a “typical” day; these data consist of nearly 21,000 eBay listings generated by roughly 7,000 individual sellers with over 9,000 buyers. These data allow us to examine the extent of actual, not estimated, cross‐border shopping by buyers, and the subsequent potential impact of this cross‐border shopping on state use tax liabilities. Our results indicate that cross‐border shopping is highly prevalent on eBay, with out‐of‐state purchases accounting for on average 94 percent of the volume of a state's purchase transactions. Even so, given the limited volume of eBay‐based transactions relative to total sales transactions, the likely impact of cross‐border transactions on state use tax revenue streams is quite low, at least at present, typically less than one percent of actual state sales tax revenues.     

Administrative problems of the provincial sales tax on beer in Papua New Guinea

With the establishment of provincial government in Papua New Guinea, the Organic Law has conferred on the provincial governments the authority to raise revenue using local revenue bases including retail sales taxes. These taxes have significant advantages and a sales tax on beer has particular benefits in P.N.G. in terms of potential yield and ease of administrative management. The tax is levied on the two breweries and the breweries collect the tax at their breweries and wholesale warehouses on behalf of the provincial governments. For the brewery with the dominant share of the market the arrangement under which it collects the tax for a commission and pays over quarterly to the provincial governments brings financial advantage. The brewery with a smaller share of the market and localized sales is less likely to be benefitting by the arrangement. For the future given expected beer consumption a change from a quantity based tax to ad valorem rates would be financially advantageous to the provincial governments, and would reduce the need for some provinces to seek tax sources elsewhere, but experience shows the general benefit of raising the tax, not at the point of final sale, but on the wholesaler or manufacturer.     

Globalization and the Retreat of Citizen Participation in Collective Action: A Challenge for Public Administration

Globalization challenges the ability of contemporary public administration to encourage citizen participation in collective action through behaviors such as tax compliance and contributions to public goods. The authors introduce a new individual‐level approach to globalization, arguing that people vary in the extent to which they are globalized and that an individual's level of globalism (ILG) reflects attitudes and dispositions that influence the way he or she resolves the social dilemma of participation in collective action (i.e., the decision to contribute versus follow a “free‐ride” strategy). Using a four‐country sample, the article examines the relationship between ILG and collective action participation decisions in three behavioral experiments. Findings support the hypothesis that regardless of country‐level globalization, a more globalized individual complies less willingly with tax codes, donates less to local nongovernmental organizations, and prefers to adopt a free‐ride strategy in a public goods game. The consequences for public administration are discussed.     

What drives the adoption of climate change mitigation policy? A dynamic network approach to policy diffusion

The requirement of bottom-up action from all the countries to deal with climate change makes it necessary to analyze the factors influencing policy adoption. This article contributes to the policy literature by shedding light on the conditions, which incentivize countries to adopt more climate mitigation policies. The theoretical argument builds on the integrated approaches to study policy diffusion, which include both internal and external determinants as explanations for the adoption of policies. While previous applications typically operationalize the latter by regional proximity, this study highlights the added value of network dependencies capturing political and cooperative interactions across countries. The article finds that the adoption of climate policies is a matter of social influence. Countries are more likely to adopt policies if they cooperate with countries that have adopted more climate policies and are in a similar structural position to countries that are active in climate protection. This article not only is an important theoretical contribution to the policy literature but also enriches our methodological and empirical understanding of climate policy diffusion.     

Public Opinion on U.S. Federal and Intergovernmental Issues in 2006: Continuity and Change

A 2006 trend survey found that Americans most often select localgovernment as giving them the most for their money, followedby the federal and state governments. African Americans aremost supportive of the federal government as giving them themost for their money; Hispanics are most supportive of localgovernment. As in many previous years, the local property taxwas viewed as the worst tax, followed by the federal incometax, state sales tax, and state income tax. Americans displayedreduced trust and confidence in the federal government; however,trust in all three spheres of government—federal, state,and local—dropped between 2004 and 2006, possibly reflectiveof the poor response of all governments to Hurricane Katrina.Analysis of surveys since 1972 reveals that there has been along-term decline in the public's support for the federal governmentand a corresponding increase in support of state and especiallylocal governments.     

Early Adopters of Solar Panels in Developing Countries: Evidence from Tanzania

Who pioneers the adoption of solar home systems as a source of power in developing countries? While many scholars of electrification praise off‐grid options, evidence on their adoption from nationally representative surveys is lacking. We test existing and new hypotheses using the 2007 Tanzanian National Household Budget Survey. Since the survey is nationally representative and has more than 10,000 respondent households, it is ideal for our purposes. We find modest support for the notion that wealthier households adopt more readily than poorer ones. Surprisingly, electrified households adopt solar home systems more readily than other households, suggesting that solar home systems provide backup power. We further find that larger households adopt more readily than smaller ones and that a rural location or high education levels do not predict solar power use. These findings suggest that new policies are needed to promote solar home systems in poor and rural areas, where their development effectiveness is maximal.     

Urban land-use models: The determinants of adoption and use

This paper delineates the conditions under which computerized land-use models have been adopted and used in the activities of a number of regional planning agencies. Our discussion is based on intensive case studies of planning agencies and the group includes both model adopters and nonadopters.We find that the presence of advocates of model adoption and of persons interested in their continued refinement and use are of paramount importance in the decision to adopt a model and in its subsequent incorporation into the life of the planning agency. However, although the presence of an advocate is by-and-large sufficient for model adoption, the continued interest of agency staff is necessary but far from sufficient in determining how and to what extent the model will in fact be exercised. At this stage both political and organizational factors become important. Moreover, it is at the use stage, rather than at the consideration of adoption, that the characteristics of the model receive more careful scrutiny and shortcomings become more important.This research has been supported by a grant from the Research Applied to National Needs Division, National Science Foundation (SSH74-19323).