Georgia State University



August 16, 2013

Georgia State University

Andrew Young School of Policy Studies

Fall, 2013

EC 8460, Economics of the State and Local Public Sector

205 Aderhold; Thursday 4:30-7:00

Instructor:

David L. Sjoquist

Room 433, Andrew Young School Building

(404) 413-0246

(404) 413-0247

sjoquist@gsu.edu

Office Hours:

Thursdays 1:30 – 2:30 or by appointment. (I am in my office most days, all day.)

Overview:

There are three levels of government in the United States: federal, state, and local. While the federal government is the largest and probably receives the majority of media attention, state and local governments provide and finance the public services that most directly affect citizens. These public services include public education, police and fire protection, street and road maintenance, water supply, sanitation, and refuse removal, among others. State and local government finance these services through of mix of tax revenue, for example property taxes, income taxes, and sales taxes, charges and fees, and grants. This course provides an overview of U.S. state and local government fiscal institutions and behavior.

In particular, Econ 8460 focuses on five major topical areas:

1. The course provides an overview of state and local government expenditures and revenues. We consider the patterns and trends of expenditures and revenues and highlight the similarities and dissimilarities among governments.

2. The course explores the factors that affect government decisions regarding expenditures and revenues.

3. The course explores the intergovernmental fiscal relations among federal, state, and local governments. That is, we will consider the actual and desired allocation of activities between levels of government as well as intergovernmental grants and tax base competition.

4. A major focus of the course is the analysis of sources of revenue such as property, sales, and income taxes, lotteries, and government operated enterprises.

5. Consideration of the provision and financing of selective public services.

Throughout the course, policy issues associated with each topic will be highlighted and explored. Applications to non-U.S. subnational governments will be weaved throughout the course.

Typically the course attracts a mix of MPA, MA, MS, and Ph.D. degree students, each with a different objective and background. I try to accommodate those differences. However, remember that this is a masters level economics course on public economics, and not a Ph.D. level course nor a course in public administration. In designing the course I have attempted to make it suitable for public administration students by providing a more applied than theoretical understanding of state and local public economic issues. The assigned readings and class presentations are not particularly rigorous or abstract in terms of economic theory; in fact the textbook was written for an upper level, undergraduate course. That said, students, and particularly Ph.D. students, are free (and expected) to delve more deeply into the theory of state and local public economics.

Objectives:

1. Become conversant with U.S. subnational fiscal institutions. For example, learn the features of the property tax and how the tax functions.

2. Become knowledgeable about various data sources for information on state and local government revenue and expenditures.

3. Understand the incentives generated by fiscal institutions.

4. Learn how to use economic frameworks (theories) to understand the consequences of the incentives created by fiscal institutions.

5. Gain an understanding of the policy issues associated with state and local fiscal institutions.

6. Improve one’s ability to frame policy options and to evaluate information (research) on policy options.

7. To enhance your ability to inform those who make fiscal policy decisions. This includes pulling together information (research), developing recommendations, defending them, and presenting the material in a coherent and readable format.

8. For Ph.D. students: Acquire a knowledge and understanding of the principal theories that apply to the state and local sector and become better at framing theoretical explanations of the economic implications of incentives.

Class Format:

Class sessions will consist of a mix of lectures and class discussions. The topics for discussion will be distributed prior to the class session.

Prerequisite:

A course in microeconomics beyond Principles of Economics, or permission of the instructor.

Assignments:

1. Readings. Required reading assignments are indicated below by an *. Many of the readings are available through the web or are in electronic journals available through the library; others are or will be on Desire2Learn. There are additional readings that I expect Ph.D. students will read; however, those readings will not be on covered on the exams.

2. Exams. There will be two exams: a mid-term and a final examination. The mid-term will be held on October 17. The final exam will be on December 12, 4:15 to 6:45.

3. Written Assignments. There will be four short written assignments. Material for these assignments will be distributed during the semester. There is an additional written assignment for Ph.D. students; details will be provided separately.

Class Participation:

All students are expected to attend class and to take an active role in class discussions. Thus all students are expected to be prepared for class discussions by having read the relevant material and considered the discussion questions for that particular class.

Grades:

The following weights will be used to determine each student's final grade for the course:

Mid-Term Exam 35%

Final Exam 35

Written assignments 30

Grades will be assigned as follows:

A+: 97-100%

A: 94-96%

A-: 90-93%

B+: 87-89%

B: 84-86%

B-: 80-83%

C+: 77-79%

C: 74-76%

C-: 70-73%

D: 0-69%

Attendance:

If you miss two classes in a row without notifying me, you will be withdrawn from the course.

Late Papers and Make-up Exams:

I expect all papers and exams to be on time. Late papers and make-up exams will be allowed only in unusual situations and then only if permission is obtained prior to the due date or date of the exam.

Honesty:

Please review the University’s Policy on Academic Honesty (Section 409)

Course Evaluation:

Your constructive assessment of this course plays an indispensable role in shaping education at Georgia State. Upon completing the course, please take time to fill out the online course evaluation.

Disabilities:

Students who wish to request accommodation for a disability may do so by registering with the Office of Disability Services. Students may only be accommodated upon issuance by the Office of Disability Services of a signed Accommodation Plan and are responsible for providing a copy of that plan to instructors of all classes in which an accommodation is sought.

AYS Career Services & Student Life Office

The Andrew Young School provides career planning services & student leadership opportunities (student clubs & organizations) to all current AYS students and alumni. AYS Career Services can help students with resume writing, interviewing, job searching, internship development, preparing for graduation school, and networking. Students are invited to attend our career events and workshops, and individualized career counseling appointments can be arranged. To see what career panels, career fairs, and events are available this semester, please visit: . The office also supports all AYS student clubs and organizations – so read about the various groups within the college, and join one today: . The AYS Career Services & Student Life office is located on the ground floor of the Andrew Young Building, in rooms G47-51.

Course Schedule:

This schedule is tentative; deviations may be necessary and are likely.

|DATE |SECTION OF OUTLINE |

|August 29 |1. INTRODUCTION |

|September 5 |2. DETERMINING TAX AND EXPENDITURE LEVELS |

|September 12 |3. MOBILITY |

|September 19 |4. FEDERALISM |

|September 26 |5. PRINCIPLES OF TAX ANALYSIS |

|October 3 |6. PROPERTY TAX (Institution) |

|October 10 |6. PROPERTY TAX (Economics) |

|October 17 |MID-TERM EXAM /7. GRANTS/ EDUCATION FINANCING |

|October 24 |8. SALES AND EXCISE TAXES |

|October 31 |9. INCOME TAX |

|November 7 |10. BUSINESS TAXES |

|November 14 |11. OTHER REVENUE |

|November 21 |12. ECONOMIC DEVELOPMENT |

|November 28 |Thanksgiving, no class |

|December 5 |13. EXPENDITURE ISSUES |

|December 12 |FINAL EXAM (4:15 – 6:45) |

COURSE READING ASSIGNMENTS

Textbook: Ronald C. Fisher, 2007, State and Local Public Finance, 3rd edition, Thompson/Southwestern

* refers to items that are required reading.

Ph.D. students are strongly encouraged to read the readings marked (Ph.D.).

The course syllabus provides a general plan for the course; deviations may be necessary.

1: INTRODUCTION

* Fisher, Chap 1, “Why Study State and Local Government Finance”

This chapter provides an overview of subnational governments in the U.S. The chapter discusses the characteristics of state and local governments (SLG) such as the size and growth of SLG, an overview of their revenue structure and expenditure patterns, and their diversity. The chapter also discusses the roles that SLG should play in the economy.

* Fisher, Chap 2, “Microeconomic Analysis”

This chapter provides basic microeconomic principles of economic efficiency that will be used in this course.

* Rockefeller Institute of Government (August 2013). “State Revenue Report: Strong Gains in the First Quarter; Mounting Uncertainty for the Rest of 2013” Available at: GUST 2012, No.



Read pages 1-3, 11-14, and the rest if you have an interest.

The Institute tracks state and local tax revenue changes by quarter. It is a good source if you want to see how state and local governments are doing.

* National League of Cities, (September 2012). “City Fiscal Conditions in 2012.” Available at:

Read pages 1-3 and the rest if you have an interest.

NCL conducts an annual survey of the fiscal conditions of cities.

* Carolyn Bourdeaux and Sungman Jun (January 2011) Comparing Georgia's Revenue Portfolio to Regional and National Peers.  (FRC Report 222) Available at:

Read pages 1-4 and glance at the rest of the report.

The report provides a comparison of the level of taxes in Georgia to other states.

* Report of the State Budget Crisis Task Force: Summary Report (July 2012). Available at:

Read pages 1-6 and the rest if you have an interest.

The Task Force looked at 6 large states and investigated the external forces on the states’ budget and identified 6 major fiscal threats.

Carolyn Bourdeaux and Richard Hawkins (January 2012). Georgia's Taxes:  A Summary of Major State and Local Government Taxes, 18th Edition. FRC Report A(18). This handbook provides a quick overview of all state and local taxes in Georgia. Available at

Roy W. Bahl and Johannes F. Linn, “Urban Public Finance in Developing Countries”, Urban Public Finance in Developing Counties, pp. 11-48.

Robert Tannenwald, “Are State and Local Revenue Systems becoming Obsolete?”, National Tax Journal 467-89 (September 2002)

Ronald C. Fisher, 2003, “The changing State-local Fiscal Environment: A 25-year Retrospective”, in Sjoquist (ed), State and Local Finances under Pressure, pp. 9-29

John Wallis, “American Government Finance in the Long Run: 1790-1990”, Journal of Economic Perspectives, Winter 2000, pp. 61-82.

2: DETERMINING TAX AND EXPENDITURE LEVEL

* Fisher, Chap 3, “Public Choice Without Mobility.”

In a representative democracy citizens vote for elected officials who in turn vote on tax and expenditure policies. This chapter explores how citizen preferences get reflected in the choices that elected officials make.

* Fisher, Chap 4, “Demand for State and Local Goods and Services.”

Citizens get utility from the provision of public services just as they get utility from private goods and service. So, just as consumers demand for private goods and services depends on prices and income, citizens demand for public services depend on prices and income. This chapter explores the nature of preferences, prices and income in the case of public services and presents estimates of the price and income elasticities.

* Sally Wallace (2003). “Changing Times: Demographic and Economic Changes and State and Local Government Finances.” In David Sjoquist (ed), State and Local Finances under Pressure. Edward Elger: pp. 30-59. Available on Desire2Learn.

This chapter explores how changes in demographics and the economy are likely to affect the behavior of SLG.

* William H. Oakland and William A. Testa, “Fiscal Impacts of Business Development in the Chicago Suburbs”, Local Government Tax and Land Use Policies in the US, pp. 201-217. Available on Desire2Learn.

This article explores the effect of the growth of suburban business on local government spending.

* (Ph.D.) Thomas Borcherding and Robert Deacon, “The Demand for the Services of Non-Federal Government.” American Economic Review Dec 1972: 891-906.

This is the classic piece on the demand for public services. It changed the way economists think about the determinants of government expenditures.

3: MOBILITY

* Fisher, Chap 5, “Public Choice Through Mobility”

One of the main features of subnational governments is the ability of individuals (as workers and residents) and capital to move between jurisdictions.

* Randall Reback (2005). “House prices and the provision of local public services: capitalization under school choice programs.” Journal of Urban Economics 57(2): 275-301.

This is another application of the Tiebout model. You should read it to see how the Tiebout model is applied and what the findings are. Ph.D. students should understand the empirical techniques used.

* (Ph.D) Charles Tiebout, 1956. “The Pure Theory of Local Expenditures.” Journal of Political Economy 64: 416-424.

This is a classic paper. Tiebout’s basic idea that individual choose their jurisdiction based on the taxes and expenditures offered has generated 1000s of paper.

* (Ph.D.) Martin McGuire (1974). “Group Segregation and Optimal Jurisdictions.” Journal of Political Economy 82(1): 112-132

This is one of the first attempts to formally model the Tiebout model.

(Ph.D.) Patrick Bayer and Christopher Timmins (2005). “On the Equilibrium Properties of Locational Sorting Models.” Journal of Urban Economics 57(3): 462–477

This paper reviews recent sorting (Tiebout) models.

Martin Farnham and Purvi Sevak (2006). “State Fiscal Institutions and Empty-Nest Migration: Are Tiebout Voters Hobbled?” Journal of Public Economics 90 (3): 407-27.

This is an application of the Tiebout model. You should read it to see how the Tiebout model is applied and what the findings are. Ph.D. students should understand the empirical techniques used.

4: FEDERALISM

* Fisher, Chap 6, “Organization of Subnational Government.”

Two major policy issues concerns which level of government should provide which service and how large should jurisdictions be. This chapter provides the basic framework for thinking about those issues.

* Wallace Oates, Fiscal Federalism, 1972, "An Economic Approach to Federalism," pp 3 - 20. Available on Desire2Learn.

This chapter presents the cases for a decentralized and a centralized system of government.

* David Brunori (2007). “Local Tax Policy and American Federalism”, chapter 2 in Local Tax Policy, DC: Urban Institute Press pp. 15-26. Available on Desire2Learn.

Brunori makes the case for the desirability of a strong and important local government sector.

* Daphne Kenyon (2001). “The Federal Impact on State and Local Government Finances at the Beginning of the 21st Century.” State Tax Notes (December 17): 929-934. Available on Desire2Learn.

This essay discusses the various ways that the federal government affects SLG revenue and expenditures.

(Ph.D.) Richard Tresch, Public Finance: A Normative Theory, 2002, Chapters 29 and 30.

(Ph.D.) David Wildasin, 1986, “Intergovernmental Fiscal Relations, Chap 6 in Urban Public Finance.

5: PRINCIPLES OF TAX ANALYSIS

* Fisher, Chap 12, “Principles of Tax Analysis.”

This chapter discusses the issues of equity and efficiency of a tax.

* National Conference on State Legislatures (Fourth edition, June 2001; updated June 2007), “Principles of a High-Quality State Revenue System.” Available at on Desire2Learn

This document lists the features of what is considered a good (high-quality) tax system.

Minnesota Department of Revenue, Tax Research Division (March 15, 2011). 2011 Minnesota Tax Incidence Study: Analysis of Minnesota’s Household and Business taxes. Available at:

(Ph.D.) Kotlikoff and Summers, 1987, “Tax Incidence” Chapter16 in Auerbach and Feldstein (ed), Handbook of Public Economics, Vol 2, North-Holland.

6: PROPERTY TAX

* Fisher, Chap 13, “The Property Tax: Institutions and Structure.”

This chapter describes the structure of the property tax.

* Fisher, Chapter 14, “Property Tax: Economic Analysis and Effects.”

This chapter explores the economic effects of the property tax, and presents the various views of who pays the property tax.

* John J. Wallis (2000). “A History of the Property Tax in America”, State Tax Notes, May 29, 2000, pp1883-1897. Available on Desire2Learn.

As the title suggests, this is a brief history from the national perspective of how the features of the property tax has changed over time. Read this OR Sjoquist’s history of the property tax in Georgia.

* David Sjoquist (2008). “A Brief History of the Property Tax in Georgia.” FRC Report 182. Available at:

As the title suggests, this is a brief history from the Georgia’s perspective of how the features of the property tax has changed over time. Read this OR Wallis’ history of the property tax in the U.S.

* George R. Zodrow (2000). “Reflections on the New View and the Benefit View of the Property Tax”, in Property Taxation and Local Government Finance, pp. 79-111. Available on Desire2Learn.

There are alternative views of the incidence of the property tax. Zodrow provides an excellent summary of these views and the existing evidence of which one is likely to be correct.

* Michael J. New (June 19, 2003). Proposition 13 and State Budget Limitations—Past Successes and Future Options. CATO Institute Briefing Paper No. 83. Available at:

In 1978, California adopted Proposition 13, which is a limit on the property taxes that local governments can impose. This essay discusses how Prop 13 and subsequent limitations affected property taxes, and suggests what changes are needed to limit the size of government.

* (Ph.D.) Peter Mieszkowski, 1972, “The Property Tax: An Excise Tax or a Profits Tax?” Journal of Public Economics, 1 (1): 73-96.

This paper fundamentally changed the way that economists think about the property tax. It is a must read for Ph.D. students. It is not required for other students.

David Sjoquist (2008). “Property Tax in Georgia.” FRC Report 174. Available at:

This paper provides a numerical description of the property tax in Georgia. It is not required, but recommended if you want to get some sense of size of the components and features of the property tax.

Arthur O’Sullivan, “Limits on Local Property Taxation: The United States Experience”, Property Taxation and Local Government Finance, pp. 177-200.

Jan Brueckner and Luz Saavedra, 2001, “Do Local Governments Engage in Strategic Property-Tax Competition?” National Tax Journal, 54(2): 203-29

(Ph.D.) Peter Mieszkowski and George Zodrow, 1989, “Taxation and the Tiebout Model: The Differential Effects of Head Taxes, Taxes on Land Rent, and Property Taxes”, Journal of Economic Literature, 27:1098-1146.

McCluskey, Cornia, and Walters, 2013, A Primer on Property Tax. Wiley-Blackwell.

Bahl and Linn, 1992. “Property Tax Systems: Practice and Performance,” Chap 4, Urban Public Finance in Developing Counties.

Daniel R. Mullins, 2003, “Popular Processes and the Transformation of State and Local Government Finance”, in Sjoquist (ed), State and Local Finances under Pressure, pp 95-162.

Arthur O’Sullivan, Terria A. Sexton, and Steven M. Sheffrin, “Proposition 13: Unintended Effects and Feasible Reforms,” National Tax Journal, March, 1999, vol 102 no 1 pp 99-112.

William A. Fischel, “Homevoters, Municipal Corporate Governance, and the Benefit View of the Property Tax”, 54 National Tax Journal pp. 157-74 (March 2001).

Henry Aaron (1975), Who Pays the Property Tax, Chapter 3, "Incidence of the Property Tax," Brookings.

Glenn W. Fisher, The Worst Tax? A History of the Property Tax in America, 1996

7: GRANTS/ FUNDING EDUCATION

* Fisher, Chap 9, “Intergovernmental Grants.”

A major source of revenue for state and local government are grant funds. This chapter discusses how grants are designed and the effect incentives that grant provide.

* Fisher, Chap 19, “Education” pp. 495-520.

Elementary and secondary education is finances largely through grants from state government to local school systems. The assigned pages from this chapter explore the financing of elementary and secondary education.

* Robert Inman (2003). “Should Philadelphia’s Suburbs Help Their Central City.” Business Review, Federal Reserve Bank of Philadelphia, Second Quarter: 24-36. Available at:

In this essay Inman makes a case for suburbs providing funding to their central city.

* John Yinger (2004). “State Aid and the Pursuit of Education Equity: An Overview.” In Yinger (ed.) Helping Children Left Behind: State Aid and the Pursuit of Educational Equity. MIT Press; pp 3-28. Available on Desire2Learn.

One of the objectives in state funding of education is to increase the equity of the allocation of education resources across students. In this reading assignment, Yinger explores how various forms of state aid affect the equity of school financing.

* Ronald Fisher and Leslie Papke (2000). “Local Government Responses to Education Grants.” National Tax Journal 153-168.

Grants can have incentives that affect the behavior of the receiving government. This article explores the extent of the response of local governments to state education aid.

* (Ph.D.) Richard Tresch, Public Finance: A Normative Theory, 2002, Chapters 31.

Ross Rubenstein and David Sjoquist, Financing Georgia’s Schools: A Primer, Fiscal Research Center report, 2003. Available at

This report provides a very detail explanation for how public schools are financed in Georgia. Read it if want a sense of how the funding mechanism works and how complex it is.

William Oakland, “Recognizing and Correcting for Fiscal Disparities: A Critical Analysis,” Chap 1, pp 1-20, in John E. Anderson (ed), Fiscal Equalization for State and Local Government Finance, 1994.

Ron Fisher, "Income and Grants Effects on Local Expenditures: The Flypaper Effect and Other Difficulties," Journal of Urban Economics, 1982, pp. 324-45.

James Hines and Robert Thaler (1995). “The Flypaper Effect.” Journal of Economic Perspectives 9(4): 217-226.

Edward Gramlich, "Intergovernmental Grants: A Review of the Empirical Literature" in Political Economy of Fiscal Federalism, Oates (ed.), Chapter 12.

Andrew Reschovsky (1994). “Fiscal Equalization and School Finance.” National Tax Journal 47(1): 185-198.

8: SALES AND EXCISE TAXES

* Fisher, Chap 15, “Sales and Excise Taxes.”

This chapter provides an overview of the structure of sales and excise taxes, their economic effects, and some of the policy issues.

* William F. Fox. (1996). “Sales Tax: Current Condition and Policy Options” in Roy Bahl (ed) Taxation and Economic Development: A Blueprint for Tax Reform in Ohio, Columbus, OH: Battelle Press. Sections on taxing services and food, pp 256-270. Available on Desire2Learn.

Just about every state tax reform commission has recommended that services be added to the sales tax base. Fox is an expert on the sales tax and in this reading he discusses the issues associated with trying to tax services. He also discusses the issues associated with the exemption of food for home consumption.

* Andrew Hanson and Ryan Sullivan (2009). “The Incidence of Tobacco Taxation: Evidence from Geographic Micro-level Data.” National Tax Journal 62(4): 677-98.

This is an analysis of how inter-state differences in tax rates affect prices over space. You should read it to see how economic theory is applied and what the findings are. Ph.D. students should understand the empirical techniques used.

* Rob Atkinson and Daniel Castro (May 20, 2010) “Closing the E-Commerce Sales Tax Loophole.” The Information Technology & Innovation Foundation. Available at:

The Supreme Court has made it difficult for states to collect sales taxes on sales made over the internet. This essay explains the issue and discusses efforts to overcome the problem.

James Alm, Edward Sennoga, and Mark Skidmore, 2005, “Perfect Competition, Spatial Competition, and Tax Incidence in the Retail Gasoline Market.” Fiscal Research Center Report No. 112 (September 2005). Available at:

This is a good discussion and analysis of the incidence of an excise tax. You should read it to see how economic theory is applied and what the findings are. Ph.D. students should understand the empirical techniques used.

Timothy Besley and Harvey Rosen (1999), “Sales Taxes and Prices: An Empirical Analysis,” National Tax Journal, 102 (2): 157-178.

This is the one of the few papers that explores the assumption that the sales tax is borne by consumers.

Michele Hendrix and George Zodrow, “Sales Taxation of Services: An Economic Perspective”, State Tax Notes, February 23, 2004, pp 641-651.

John F. Due and John L. Mikesell, "Local Government Sales Taxation," Chapter 11, pp. 277-318 in Sales Taxation: State and Local Structure and Administration, 1994, Urban Institute Press.

Michael Mazerov (August 10, 2009) Expanding Sales Taxation of Services: Options and Issues. Center for Budget and Policy Priories. Available at: .

9: INCOME TAX

* Fisher, Chap 16, “Income Taxes.”

This chapter provides an overview of the structure of the personal income tax, its economic effects, and some of the policy issues.

* Randall Holcombe and Donald Lacombe, 2004, “The Effect of State Income Taxation on Per Capita Income Growth”, Public Finance Review, 32(3): 292-312.

A major question regarding the personal income tax is the extent to which the tax affects the level of income. This article is an attempt to measure the effect of income taxes on the growth of income.

* Arduin, Laffer and Moore Econometrics (November 2011). Eliminating the State Income Tax

in Oklahoma: An Economic Assessment. Oklahoma City, OK: Oklahoma Council of Public Affairs Available at:

The governor of Oklahoma would like to eliminate the state’s personal income tax. This study presents evidence of how the state’s economy will grow if the income tax is eliminated. This report will be the basis for the class discussion.

* James B. Stewart (March 19, 2012). “Tax Me If You Can.” The New Yorker. Available on Desire2Learn.

A short article describing the steps the rich take to avoid paying state personal income tax.

Robert Buschman and David Sjoquist (2012). An Analysis of Options for Reforming Georgia's Income Tax:  Simplicity, Equity, and Adequacy  FRC Report 240. Available at:

This report presents an analysis of possible changes to the Georgia personal income tax. It shows the change in total revenue and in the distribution of tax burden.

Wallace and Edwards, 1999. “Personal Income Tax,” Chapter 8 in Hildreth and Richardson (eds), Handbook on Taxation.

Stephen T. Mark, Therese J. McGuire, and Leslie E. Papke, “The Influence of Taxes on Employment and Population Growth: Evidence from the Washington, D.C. Metropolitan Area”, 53 National Tax Journal 105-24 (March 2000)

Charles W. Christian, Sanjay Gupta, and James C. Young, “Evidence of Subsequent Filing from the State of Michigan’s Income Tax Amnesty”, 55 National Tax Journal 703-21 (September 2002)

ACIR, Local Revenue Diversification, Local Income Taxes, 1988, pp. 1-20.

10: BUSINESS TAXES

* Fisher, Chap 17, “Business Taxes.”

This chapter provides an overview of the various ways that businesses are taxed, including the corporate income tax, along with a discussion of some of the policy issues.

* Thomas F. Pogue (1998). “State and Local Business Taxation: Principles and Prospects”, in David Brunori (ed) The Future of State Taxation, Washington DC: Urban Institute Press, pp. 89-110. Available on Desire2Learn.

This reading lays out a set of principles on which to design a tax on business.

* Daphne Kenyon, 1996, “A New State VAT? Lessons from New Hampshire,” National Tax Journal, 49(3): 381-99.

New Hampshire is the only state in the U.S. to impose a value added tax. This article explains how it works and what effect it has had.

* Thomas F. Pogue (2007). “The Gross Receipts Tax: A New Approach to Business Taxation?” National Tax Journal 60(4): 799-819.

A few states have adopted a gross receipts tax in place of the corporate income tax. This article discusses the pros and cons of adopting a gross receipts tax.

George R Zodrow (2010). “Capital Mobility and Capital Tax Competition.” National Tax Journal 63(4): 865-901

David L. Sjoquist, Laura Wheeler, and Lorenzo N. Almada (2012). Georgia's Corporate Income Tax:  A Description and Reform Options.  FRC Report 241. Available at:

William F. Fox, LeAnn Luna, “State Corporate Tax Revenue Trends: Causes and Possible Solutions”, 55 National Tax Journal 491-508 (September 2002)

Chris Atkins (September 2005). A Twentieth Century Tax in the Twenty-First Century: Understanding State Corporate Tax Systems. Tax Foundation Background Paper Number 49.

11: OTHER REVENUE

* Fisher, Chap 8, “Pricing of Government Goods -- User Charges.”

Economists argue that it would be better if state and local governments imposed charges for some of the public services offered rather than financing them through taxes and imposing charges when demand exceed capacity. This chapter presents the arguments and theory for doing so.

* Fisher, Chap 18, “Revenue From Government Monopoly and Regulations.”

Many state and local governments operate businesses that in other states are private businesses. This chapter discusses these business and the issues associated with them.

* John Anderson (2005). “Casino Gambling in the United States.” National Tax Journal 58(2): 303-324.

The legalizing and taxing of gambling has generated a new source of state revenue. This article discusses the way in which states tax casino gambling and the economic issues associated with such taxes.

* Sock-Yong Phang and Rex S. Toh (2004). “Road Congestion Pricing in Singapore: 1975 to 2003.” Transportation Journal 43 (2): 16-25.

Many years ago Singapore adopted a policy of charging drivers for using streets. This article explains how this policy works and what effect it has had on driver behavior.

Marie Lynn Miranda et al, (1994). “Market-Based Incentives and Residential Municipal Solid Waste,” Journal of Policy Analysis and Management 13(4): 681-698.

(Ph.D), 1987, Bös, “Public Sector Pricing,” Chapter 3 in Auerbach and Feldstein, Handbook of Public Economics, vol 1.

Bahl and Linn, 1992. “Charging for Urban Water Services,” chap 10, and “Charging for Other Urban Services,” Chap 11, Urban Public Finance in Developing Counties.

Paul B. Downing and Thomas J. DiLorenzo, "User Charges and Special Districts" in Management Policies in Local Government Finance, Aronson and Schwartz (eds.).

12: ECONOMIC DEVELOPMENT

* Fisher, Chap 22, “Economic Development.”

The focus of this chapter is on how state and local policies affect economic conditions.

* Terry Buss, “The Effect of State Tax Incentives on Economic Growth and Firm Location Decisions: An Overview of the Literature: Review Essay”, Economic Development Quarterly, Feb 2001, pp. 90-105.

This is a survey of studies on the effect of economic development incentives such as tax credits.

* Robert Chirinko and Daniel Wilson (2007). State Tax Investment Incentives: A Few Facts” State Tax Notes (February 26): 553-539. Available on Desire2Learn.

One type of economic development policy focuses on incentives to investment in plant and equipment in the state. This article discusses the design and effectiveness of such incentives.

* Will Luther (January 14, 2010). Movie Production Incentives & Film Tax Credits: Blockbuster Support for Lackluster Policy. Special Report 173. Tax Foundation. Available at:

Over the past couple of decades an increasing number of states had attempted to attract movie production to their state by offering tax incentives. This report discusses the growth in such policies and their desirability.

* Tim Feran (Aug 16, 2012). “Tax credit helps Ohio lure job-creating film projects,” The Columbus Dispatch. Available on Desire2Learn.

A short newspaper story about the effects of Ohio’s film tax credit.

* Robert Tannenwald (2010). On Massachusetts’ Film Tax Credits. Center on Budget and Policy Priorities (March 3). Available at: .

Tannenwald’s testimony to the Massachusetts legislature lays out the case against film tax credits.

David Brunori, “Interstate Competition for Economic Development”, State Tax Policy: A Political Perspective, P31-48 (Ch3)

Robert Greenbaum and John Enberg, 2004, “The Impact of State Enterprise Zones on Urban Manufacturing Establishments”, Journal of Policy Analysis and Management 23(2):315-340.

Anthony V. Popp and James Peach August 26, 2008). The Film Industry in New Mexico and The Provision of Tax Incentives: A Report Submitted to the Legislative Finance Committee of the State of New Mexico. Arrowhead Center, Office of Policy Analysis, New Mexico State University. Available at:

Peter Calcagno and Henry Thompson, “State Economic Incentives: Stimulus or Reallocation?” Public Finance Review, November 2004, pp 651-665.

Dagney Faulk, “Do State Economic Development Incentives Create Jobs? An Analysis of State Employment Tax Credits”, 55 National Tax Journal 263-280 (June 2002)

Daphne A. Kenyon, Adam H. Langley, and Bethany P. Paquin (2012). Rethinking Property Tax Incentives for Business. Cambridge, MA: Lincoln Institute of Land Policy.

13: EXPENDITURE ISSUES

* Fisher, Chap 20, “Transportation”

This chapter discusses the financing of transportation.

* Fisher, Chap 21, “Health and Welfare”

This chapter discusses state Medicaid and welfare programs.

* James Marton and David Wildasin, 2007. “Medicaid Expenditures and State Budgets: Past, Present, and Future, National Tax Journal, (June): 279-304.

This article provides a nice summary of the fiscal issues associated with Medicaid.

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