Highway Accessibility,Location Rents,and the Efficiency of Metropolitan Area Tax Base Sharing

One solution that has been proposed for the fiscal disparities in fragmented metropolitan areas is the sharing of taxes generated by commercial and industrial property. A criticism of this proposal is that it distorts the efficient pattern of business locations resulting when an implicit market for business locations is allowed to develop through the independent fiscal behavior of communities and the optimizing location behavior of businesses. Critics recognize that the efficiency argument against sharing a metropolitan area's business tax base must be qualified to the extent that local governments possess location advantages which enable them to extract rents from business firms. This paper presents an empirical analysis which permits a partition of the local property tax payments from industrial firms into accessibility location rents and compensation payments to the community for the negative externalities of industrial development. The empirical analysis suggests that approximately 40 percent of the industrial taxes received by communities in this analysis represents accessibility location rents. It is concluded that these receipts could be redistributed through a metropolitan area tax base sharing program without affecting the efficiency of the implicit market for business locations.     

Evolutionary Economic Geography for OFCs: Do Political Ties to the Onshore Reduce Capital Inflow Volatility?

This paper analyses the structural change in small‐island economies—sometimes labeled offshore financial centers (OFCs)—that have seen wealth‐generating activities through offshore financial services decrease in value since 2008. At the same time, OFCs have come under increasing scrutiny from supranational organizations such Organization for Economic Co‐operation and Development and European Union for perceived unfair tax practices and money laundering activities. Some OFCs have proactively adjusted to this sea change by broadening the economic base through development of new offshore business activities such as e‐gaming, film industry, and niche manufacturing. Most have increased co‐operation with onshore regulatory bodies to promote service and product legitimacy. Econometric analysis explores the assertion that OFCs that do not have a political link to the onshore may be exposed to greater capital inflows volatility than OFCs that have such a link. Case study analysis using the theoretical lens of evolutionary economic geography illustrates that a small OFC is creating spatialities of economic novelty by adapting economic development strategies deployed during the successful development of the center prior to the recent recession. Our findings reveal the importance of political links to the onshore to reduce capital inflow volatility and the importance of local public–private interaction to legitimize post‐recession development.     

Did incentives help municipalities recover from the Great Recession? Evidence from Midwestern cities

This study assesses the impacts of local business incentives in the largest urban areas of Illinois, Michigan, and Wisconsin, three Midwestern states that share similar histories and settings. We assembled a unique dataset combining information on two types of incentives, tax increment financing districts and tax abatements, together with socio‐economic, geographic, fiscal, and spatial competitive characteristics for all of the municipalities in six metropolitan areas. The outcome measures include employment growth, establishment formation, and business relocation. The analysis extends knowledge of the effects of economic development incentives in two ways. First, we improve upon previous research by incorporating key factors in municipal decisions to offer incentives. Second, we add to limited empirical evidence concerning local incentives following the Great Recession. Variation in the use of incentives reflects not only local decision‐making but also differing fiscal capacities and situations of adaptation to adverse economic conditions, with some governments pulling back on incentives and others initiating new approaches to retain or lure businesses.     

Fiscal Decentralization and Economic Growth in Central and Eastern Europe

The majority of the literature on fiscal decentralization has tended to stress that the greater capacity of decentralized governments to tailor policies to local preferences and to be innovative in the provision of policies and public services, the greater the potential for economic efficiency and growth. There is, however, little empirical evidence to substantiate this claim. In this paper we examine, using a panel data approach with dynamic effects, the relationship between the level of fiscal decentralization and economic growth rates across 16 Central and Eastern European countries over the 1990–2004 period. Our findings suggest that, contrary to the majority view, there is a significant negative relationship between two out of three fiscal decentralization indicators included in the analysis and economic growth. However, the use of different time lags allows us to nuance this negative view and show that long‐term effects vary depending on the type of decentralization undertaken in each of the countries considered. While expenditure at and transfers to sub‐national tiers of government are negatively correlated with economic growth, taxes assigned at the sub‐national level evolve from having a significantly negative to a significantly positive correlation with the national growth rate. This supports the view that sub‐national governments with their own revenue source respond better to local demands and promote greater economic efficiency     

The State‐Level Impacts of Enforcing Sales Taxes for E‐retail Purchases

The Marketplace Fairness Act (S. 743) recently passed by the U.S. Senate may portend a national move toward states imposing sales taxes for business‐to‐consumer e‐retail purchases. While much of the policy debate surrounding this question has focused on trade creation versus diversion, there are likely distinct compositional effects at the state level, which will affect both economic activity and tax revenue. Consumers are clearly hurt by an online sales tax. However, such a policy would seemingly benefit state tax coffers, as well as traditional brick‐and‐mortar retailers and their employees. This paper uses a computable general equilibrium model approach to get a better understanding of the state‐level income, employment, and tax revenue effects of such a policy shift, in particular the likely tradeoffs between these three traditional economic targets across reasonable ranges of price elasticities.     

The Economics and Politics of Tax Increment Financing

ABSTRACT Tax Increment Financing (TIF) is a popular yet controversial tool that allows local governments to use property tax revenue to fund the public costs of economic development. Since TIF gives one local government the power to affect the tax bases of the overlapping jurisdictions, there is uncertainty and argument on the part of government officials and taxpayers as to who really finances the program. To evaluate the alternative contentions, this paper presents a general methodology that identifies which taxpayers in which locations fund the TIF's expenditures, and sets forward the conditions under which such a local economic development policy can be beneficial to taxpayers. The paper applies the model to study the TIF program currently active in downtown Des Moines, Iowa. The evidence indicates that the taxpayers in the entire metropolitan area subsidized the downtown activities in the early years, but now pay lower property tax rates due to the city's TIF-financed urban revitalization program.     

Public Education Financing Trends and the Gray Peril Hypothesis

The effects of migrating seniors on the provision of local public services in rural communities is growing in importance because of the large number of retiring baby boomers and the increasing rate at which these retirees are locating outside traditional retirement destinations. Some communities are optimistic about attracting and retaining retirees as an economic development strategy, but others are concerned that inmigrating seniors may be reluctant to support local public services, such as education, bringing with them “Gray Peril.” This article attempts to clarify questions regarding the Gray Peril hypothesis and local ability and willingness to fund education in Tennessee, an increasingly popular retirement destination. To this end, county per pupil education expenditure growth is explained by growth trends in local property tax assessment and sales tax revenue, and migration patterns of the retirement‐aged population from 1962 to 2002.     

Regional Economic Activity and Petroleum Industry Incentive Policies: Utah's Uintah Basin

ABSTRACT Proponents of petroleum industry subsidies often assert that such policies will have positive economic implications for rural communities. This paper examines the economic impacts of such a policy in Utah. Specifically, this paper quantifies the direct and indirect economic and fiscal impacts of a tax credit granted for oil and gas well workovers in Utah's Uintah Basin. The analysis is made possible by an input-output model constructed specifically for Utah's oil producing economy. The tax credit policy was found to generate a net fiscal loss for the state. However, it does generate employment in the Uintah Basin. The total per job cost to the state of generating an average of one job per year for 5 years through the tax credit policy is $24,056 (1991 dollars). However, if the public expenditure impacts are taken into account, then the cost per job could be as high as $48,423 (1991 dollars). Whether there are other ways to generate the same employment gains at a lower cost was lost in the political debate surrounding this petroleum industry tax credit.     

The Impact of Tax Incentives: Do Initial Economic Conditions Matter?

Do the returns to business tax incentives differ according to the initial economic conditions of the area providing tax relief? Past research studies have provided conflicting answers to this question. Bartik (1991) concluded that rates of return to business tax incentives are likely to be greater for less affluent areas than for wealthier areas offering equivalent incentives. In contrast, Fisher and Peters (1998) determined that tax incentives tend only to offset higher taxes on businesses located in low income areas. This study examines this issue using a unique data set that allows for a fresh look at this issue. We find that the returns to subsidized investment are greater in lower unemployment and higher income areas. This suggests that tax incentives reinforce pre‐existing economic differences across areas.     

State-level austerity,education, and large urban labor markets: Evidence from fiscal policy experiments in Kansas and Wisconsin

In 2011, Kansas and Wisconsin experimented with fiscal austerity policies. Proponents of the tax and public expenditure cuts argued that they would spur economic growth, while opponents claimed that it would harm vulnerable populations. I use the timing of these policies and the synthetic control method to examine how state-level austerity affected earnings per worker for high and low education segments of the workforce in major urban areas. The results suggest that the Kansas and Wisconsin fiscal experiments hurt low education workers in some urban areas. The estimates also show heterogeneity in the treatment effect. Notably, Madison, WI, was the only urban area that experienced substantial positive growth in both education segments.     

A Regional Comparative Static CGE Analysis of Subsidized Child Care

ABSTRACT Concerns with the equity of societal income distribution typically underpin the provision of government subsidies to low‐income households, in which such subsidies are commonly believed to reduce economic growth. Using a regional computable general equilibrium (CGE) model, this study examines the equity and growth aspects of subsidizing formal child care services for low‐income households at the state level. The results suggest that state government subsidization of formal child care services does not necessarily reduce the level of economic activity, even when accounting for negative growth effects of tax increases required to finance the subsidies. The CGE model also reveals economic impacts on households and industry sectors not directly affected by the subsidies, impacts that would be omitted from a partial equilibrium microeconometric appraisal.     

Tax Incentives in an Economy with Public Goods

This study employs a dynamic computable general equilibrium (CGE) model of Ohio to evaluate the effect of a state corporate tax cut. The innovative features of this study are (1) the use of the cost of capital concept, (2) dynamic adjustment mechanisms in factor markets, and (3) incorporation of public goods in the household utility function and firms' production functions. The model results indicate that the stimulatory effects of tax cuts for economic development are muted when effects of public expenditures on the productivity of private capital and the migration of households are taken into account. This is because the reduction in public expenditure due to the tax cut implies (1) lower productivity for private industries and (2) lower levels of labor in-migration during the initial several periods after the policy shock as compared to the pre-policy sequence of equilibria. This study shows that evaluation of tax policy without simultaneously considering the effect of public goods can be misleading.     

The Impact of State and Local Tax and Expenditure Limitations on State Economic Growth

Employing a unique index of Tax and Expenditure Limitation (TEL) restrictiveness, we estimate a family of economic growth models using a panel of the 50 U.S. states for the period 1969 to 2005. Our central goal is to assess the relationship between TEL restrictiveness and economic growth. Results suggest that stronger TELs imposed on state governments have a dampening effect on state economic growth and TELs imposed on local governments have a weak negative impact on growth. The results do not support the argument that legislatures can use tax and expenditure limits as a mechanism to promote economic growth.     

Why Some States Grow Faster than Others: New Growth Models for State Economic Policy

Recent studies have identified factors statistically related to differences in state economic growth. These findings relate to regional policy because they appear to identify political options that could then be justified as improving growth. This paper evaluates the reliability of these studies as policy guides. It finds that most statistical conclusions are fragile and are ttherefore risky policy guides Economic base theory performs well, and provides the most reliable state level policy options. These policies, however, have to be crafted carefully to avoid pitfalls associated with traditional (and perhaps unpopular) basic industries.     

State and Local Government Finances: Was There a Structural Break in the Reagan Years?

The Reagan administration's “New Federalism” and tax reform proposals were expected to have chilling effects on growth of state and local government revenues and expenditures. This paper examines the hypothesis that there was a structural break in state and local government fiscal behavior in the 1980s. Although the evidence is far from conclusive, it does suggest some different fiscal patterns in this decade. However, the real structural break appears to have occurred in the late 1970s and these trends have continued during the Reagan years.     

Tax enforcement interactions among Chinese provinces: A frontier and spatial analysis

Spatial interactions in tax policy have been examined intensively for developed countries. This study presents new evidence of tax enforcement interactions from a developing country. A trend of intensified enforcement on the corporate income tax (CIT) over time is identified among Chinese provinces. Additionally, stringent CIT enforcement in neighboring provinces enhances CIT enforcement in the surrounded province. Furthermore, tax enforcement interactions involve both the state and local tax authorities. The findings not only help to understand the Chinese “regionally decentralized authoritarian system,” but also echo second‐generation fiscal federalism that highlights the role of institutional incentives in shaping intergovernmental fiscal relations.     

State Employment Growth: The Impact of Taxes and Economic Development Agency Spending

ABSTRACT The results of this study confirm the expected positive relationship between economic development agency spending and employment growth among the states. Furthermore, it is concluded that past studies, by failing to control for state economic development agency spending in estimated regression equations, have underestimated the negative impact of personal taxes on employment growth.     

Regime Network Restructuring in Akron,Ohio, 1975–2009: A Longitudinal Social Network Analysis

The purpose of this paper is to explore the impacts of extra‐local economic and political forces on the business community participants of the governing regime coalition in Akron, Ohio, and in turn, how other regime partners responded to and engaged with the changing constitution of Akron's business community. Unlike the UK where municipalities receive substantial fiscal support from regional and national governments, American cities are more readily forced into regime partnerships with other public and private actors for fiscal solvency, including, primarily, the local business community. In the case of Akron, the local business community experienced a prolonged and ongoing period of comprehensive deindustrialization and economic restructuring, forcing the city into partnerships with less traditional non‐private sector actors as Akron's business community structure continues to transform. A secondary objective is to forward the utility of social network analysis in regime theory applications. Social network analysis offers a way to situate arguably the most influential actors in a regime coalition. Utilizing the directories of Standard and Poor's Index of Corporations and Directors from 1975 through 2006, social network analysis is performed on the interlocking network of corporations and civic organizations based in Akron for each decade, allowing a longitudinal view of the changing business community partners of Akron's governing coalition.     

Immigration,Migration, and State Redistributive Expenditures

The effect of immigration on state and local budgets is a frequent topic of both political and academic conversations. A controversial issue among scholars is whether or not immigration induces outmigration of low income native born residents, a population movement which would potentially have implications for the jurisdictional distribution of immigration's fiscal impact. It is hypothesized here that if interstate poverty migration occurred, it should cause fiscal spillovers by distributing some of the public sector burden of immigration from immigrant “host” states to neighboring states. This paper uses cross‐sectional state data from 1988–1995 to explore the relationship between immigration in neighbor states and state redistributive expenditures. The results suggest that there is a positive relationship between immigration to neighboring states and redistributive expenditures. While most discussion of the fiscal impact of immigration has focused on the effects on host states and localities, the implications of these findings are that there are fiscal spillovers to neighboring states, suggesting that fiscal impacts on host states have been over‐estimated and effects on neighboring states have been underestimated. Additionally, the implications of recent welfare reform, which gives states the opportunity to use citizenship as a criterion for program eligibility, are discussed.     

Construction of Silk Road Economic Belt and Industrial Selection of Minority Areas in Northwest China

Construction of Silk Road Economic Belt is a giant engine for the economic upgrading of China.Minority areas in Northwest China since then has become a forward position for the opening to the west,which is extremely significant for expanding the hinterland of Chinese economic development,activating economic development in inland and border areas,promoting the open economic development in central and west China,and also forming a new growth pole of Chinese economy.Optimization of industrial selection can promote economic development,constant economic growth of the northwest minority areas and the construction of Silk Road Economic Belt requires the optimization and adjustment of industrial selection,cultivation of competitive industries with market prospects,and formation of new economic growth points.Minority areas in northwest China have a vast territory and abundant resources that are all powerful support for the development of local competitive industries.