Creative Politics: Taxes and Public Goods in a Federal System

Notes

Notes Chapter 1 1. One concern that the method does not address is temporal. The timing of this study is limited to the mid-1990s, so I cannot conclude that states will never act to raise income taxes. How well these principles interact and play out over time is a good question that further research may elucidate. 2. This research is not an analysis of public ‹nance or tax incidence (Phares 1980). Footnotes offer technical points that may help readers understand the signi‹cance or implications of a policy alternative. The appendixes offer summaries of policies or institutional arrangements that affected the pertinent policies. Chapter 2 1. I also assume that no change in either spending or taxes implies a change in the economic ef‹ciency of ‹nancing government goods and services. 2. In this illustration I focus on trade-offs in spending only to keep the analysis as neat as possible. Governments could decide not to trade public goods and particular bene‹ts but could instead choose to cut taxes and thus increase citizens’ private incomes. Chapter 3 1. In Mississippi, the legislature in 1992 established contingency trust funds for education and a general fund to offset future revenue swings resulting from the state’s reliance on gambling revenues. 2. For example, New York and New Jersey have agreements regarding the tax treatment of New Jersey residents who work in New York City, and Pennsylvania and New Jersey have agreements about New Jersey residents who work in Philadelphia. 3. Previous work on state politics has largely ignored the in›uence of symbolic politics. One notable exception is Lowery and Sigelman (1981), which tests the strength of various econometric models designed to explain tax revolts. The 163 authors conclude that the relative weaknesses of these more conventional models resulted in part from their failure to incorporate measures of symbolic politics. My research offers positive evidence that conforms to Lowery and Sigelman’s conclusions . Chapter 4 1. There has also been a great deal of activity centered on property tax reductions and limitations. I consider these changes in chapter 5 and concentrate on income and sales taxes in this chapter. 2. Much of the increase in state taxes during the 1970s resulted from states assuming greater ‹nancial responsibility for local programs, particularly education . Overall, 20 percent of local expenditures shifted to state government between 1960 and 1985. 3. Among states considering income tax reductions are Arizona, Connecticut, New York, New Jersey, Massachusetts, and Montana. 4. In Washington, state and local taxes consume 17.3 percent of the incomes of the poorest ‹fth of all citizens in the state. Florida and Tennessee also rank among the top ten states in terms of the tax burden placed on low-income citizens. 5. In both New Jersey and Michigan, court order or the threat of litigation motivated some legislators to support major tax changes. 6. The increase in the personal exemption would have been fully offset by the higher tax rate with seven thousand dollars in taxable income. Thus, single people would have received no bene‹t from the personal-exemption change if their gross annual incomes exceeded ten thousand dollars. The exemption reduction/rate increase would have been tax neutral for a family of four with a gross annual income of forty thousand dollars. Chapter 5 1. Because both education and infrastructure spending can have characteristics of public goods yet confer particular bene‹ts, many legislators argued for a mixed strategy for providing such goods. They suggested that the appropriate strategy was to have citizens pay according for a portion of individual bene‹ts they might receive from a program but to have the state pay from its general revenues for the portion of bene‹ts likely to accrue to the state. For example, in an education program , the state could subsidize tuition at a technical vocational school and yet require some tuition from students, who would bene‹t from higher wages in the future. In the case of infrastructure spending, the state could initially ‹nance road construction but then apply a gas tax or toll to recoup its investment from those most particularly bene‹ting from new roads. 2. Jackson and Hawthorne (1987) and Jackson and King (1989) argue that the tax incidence generates a particular income distribution that in turn can be considered a collective good within a polity. 3. The same legislator hoped that there would be positive spin-off effects from Mercedes’s new plant in Alabama. He suggested...