Lost Stability? Consumption Taxes and the Cyclical Volatility of State and Local Revenues

Hou, Yilin; Seligman, Jason S.

doi:10.2139/ssrn.1029697

Cited by 20 publications

(27 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The literature suggests that sales taxes are more volatile than property taxes (Afonso, 2013b;Hou & Seligman, 2005), which is the primary source of own source revenue for local governments (Delisle, 2010). This is important for planning purposes because programs funded through earmarked revenues may become dependent on the earmarked revenue, and most volatility in revenue comes in shortfalls (Hou & Seligman, 2005). More than 53% of respondents say that the use of LOSTs does increase the variability of own source revenue and only 25% say that it does not.…”

Section: Policy Choicesmentioning

confidence: 99%

Local Government Capital Spending During and After Recessions: A Cause for Concern?

Afonso

2014

International Journal of Public Administration

View full text Add to dashboard Cite

This article combines literature on cutback management with the results of a survey of county commissioners. Specifically, it focuses on the use of capital spending reductions in county government to cope with fiscal stress and the potential long-term impact of such reductions in response to the limited amount of research on this form of local government. In light of the literature and survey results, it recommends that county governments change their behavior and avoid cuts to their capital budgets due to the long-term costs of delayed maintenance and the opportunity costs incurred by stifling economic development. It also presents policy choices available to many counties that enable them to maintain capital investments, including public-private partnerships and earmarked local option sales taxes. The study concludes with a call for quantitative research on the long-term effects of capital reductions during economic downturns.

show abstract

Section: Policy Choicesmentioning

confidence: 99%

Local Government Capital Spending During and After Recessions: A Cause for Concern?

Afonso

2014

International Journal of Public Administration

View full text Add to dashboard Cite

show abstract

“…They recommend that states might respond with policies that deposit greater upside revenue swings in budget stabilization funds (BSFs). The links between economic volatility, budget stability, and BSF design have been thoroughly examined by Hou (2013), who considers BSF dynamics in great detail, taking time to develop the public choice perspective across national and, more notably, subnational governments. Because of its public choice orientation, the work of Hou lays out twin motives for government: first, prudence regarding the size and growth of each governmental unit (budget stabilization) and, second, economic stabilization.…”

Section: Approach Considerations and Related Literaturementioning

confidence: 99%

“…This volume is a sequel to Hou (2013), shifting the focus of examination from the subnational level ("states" in the United States and "provinces" in other countries) to the local level. Both of the two books in this sequel examine the central question of how the government sector can better weather revenue fluctuations due from economic cycles.…”

Section: Introductionmentioning

confidence: 99%

“…Subnational governments need to make strong and committed efforts in order to stabilize their budget so as to smooth program outlays across the boom and bust cycles. Drawing from research in multiple areas, Hou (2013) finds that budget stabilization is a natural demand by the society-citizens and businesses alike. The demand for government budget stabilization is related to the basics and quality of life for human beings, with all kinds of fluctuations and uncertainties.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Local Government Budget Stabilization

Hou¹

2015

View full text Add to dashboard Cite

“…Using Georgia data, Hou and Seligman (2007) show that revenues from sales taxes are less stable than property taxes, and therefore that adopting local-option sales taxes increases the volatility of local governments' own-source revenues. In a national study, Holcombe and Sobel (1995) find that income taxes are more cyclically variable and less predictable than sales taxes.…”

Section: Research Based On Data From Other Statesmentioning

confidence: 99%

The Fiscal Impact of Potential Local-Option Taxes in Massachusetts

Zhao

2010

SSRN Journal

View full text Add to dashboard Cite

Municipal governments in Massachusetts have experienced difficulties raising adequate revenues to meet their expenditure needs. Responding to these challenges, policymakers have been investigating additional revenue sources for municipalities, such as new local-option taxes. Using a Representative Tax System approach and new data, this paper examines the impact of local-option taxes on meals, general sales, income, and payroll on revenue-raising capacity of Massachusetts municipalities. This paper shows that new local-option taxes would help municipalities generate considerable additional revenues from untapped sources. However, revenue capacity from new local-option taxes is not evenly distributed across municipalities. Local-option tax capacity is concentrated in Boston suburbs and resort areas in eastern Massachusetts. On average, large cities would benefit more from local sales, meals, and payroll taxes than smaller towns. High-income, property-rich municipalities would gain more local-option tax capacity than low-income, property-poor municipalities. Local-option taxes also do not compensate municipalities in proportion to their loss of state aid dollars in FY 2009. 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.

show abstract

Lost Stability? Consumption Taxes and the Cyclical Volatility of State and Local Revenues

Cited by 20 publications

References 9 publications

Local Government Capital Spending During and After Recessions: A Cause for Concern?

Local Government Capital Spending During and After Recessions: A Cause for Concern?

Local Government Budget Stabilization

The Fiscal Impact of Potential Local-Option Taxes in Massachusetts

Contact Info

Product

Resources

About