Decentralized Tax and Public Service Policies with Differential Mobility of Residents

A central focus of an extensive literature on fiscal competition has been on how the decentralization of tax and service policy affects efficiency, generally whether public services are inefficiently under- or overprovided. This question has traditionally been addressed in a framework in which the tax base regions compete for mobile capital. Here I am also interested in the impact of fiscal decentralization on both public service provision and tax policy but in a framework with both labor and capital mobility. Rather than limiting the competing regions to taxing only capital or only labor, I consider the endogenous choice of the two tax instruments in the context of two related models. In the first model, while labor is mobile it is also homogeneous. In this model I show that regions will choose to only tax income and not capital when public service costs are proportionate to the population and, by doing so, will provide the efficient level of public services. However, if there are public service costs not proportionate to the population, “fixed costs,” if given the option, regions will tax or subsidize capital as well as tax income. As a result of capital taxation, the public service is underprovided. I extend the model along the lines of Wildasin (AER, 2000) to consider two groups of workers who differ in both mobility and, in my case, human capital (skill). Unlike Wildasin, the difference in income is exogenous and not the result of investment decisions. In this model, I first consider the policies chosen by these regions when they can only tax income. I find that the public service can be either over or underprovided, depending on the relative impact of changes in public services and taxes on the mobility of the two groups. Next, I consider whether, in the absence of fixed costs, regions will want to tax or subsidize capital and find that in general they will with the magnitude and sign of a tax (subsidy) on capital depending on how capital taxation affects the relative mobility of the two groups of workers.

The Taxpayer Relief Act of 1997 and Homeownership: Is Smaller Now Better?

Prior to 1997, homeowners under 55 were allowed to defer capital gains taxes from a home sale if they bought another house at least as expensive, while those over 55 received a capital gains exclusion regardless of the cost of their new home. The Taxpayer Relief Act of 1997 (TRA97) eliminated this differential tax treatment. We exploit the differential treatment before 1997 to uncover TRA97’s effects. Comparing homeowners under 55 before and after 1997, we find that those who moved after 1997 are twice as likely as to list “seeking less expensive housing” as a reason for moving, 8 percent less likely to own their residences and 9 percent less likely to live in a single family home.

Business Incentives and Employment: What Incentives Work and Where?

State governments offer tax and location-based incentives to entice firms to locate or expand operations in their state. We evaluate the effect of these incentives on employment using a panel data of Kentucky counties. These data are unique because they contain information on actual incentives received rather than on incentives offered, an important distinction because the majority of incentives offered are never claimed. Because Kentucky offers incentive plans similar to other states, the results are applicable to other states. Training incentives have a strong, positive effect on economic activity, whereas tax incentives have a more modest positive effect. These effects differ with the location of the county, with almost no impact in interior counties and much larger, positive and significant impacts in counties along state borders. There are few if any spillover effects to adjacent counties.

Long-Distance Turbidite Correlations in the Horseshoe Abyssal Plain

Few studies on modern abyssal plain turbidites have attempted to assess the lateral extent of individual units and few have therefore been able to provide any information on the evolution of turbidity deposits across long abyssal plain distances. In the 4755 m-deep Horseshoe Abyssal Plain, ten distinct lithologic units (six of these Iberian Peninsula-derived turbidites) were delineated in nine piston cores on the basis of stratigraphic position, thickness (range of 20 cm to greater than 500 cm), color, sediment type, sedimentary structures, x-ray mineralogy, and the ubiquitous presence of units in all abyssal plain and supplying canyon piston cores. In order to make this correlation more rigorous, detailed grain size analyses, light and heavy mineralogy of sands, HCl treatment, and volatile solids determinations were performed on three of the six turbidite units, which have volumes of 5.7, 8.0, and 12.1 km3. These analyses further confirm correlation over the entire 15,000 km2 area of the Horseshoe Abyssal Plain and certainly provide long-distance correlations for six individual turbidites of over 300 km for each flow. In addition, shallow subbottom reflectors and transparent zones seen on 3.5 kHz-P.D.R. profiles can be tied into the in situ stratigraphy of the piston cores. The results of previous studies on modern abyssal plain turbidites, ancient turbidite deposits, and experimental lab studies are compared with results from the Horseshoe Abyssal Plain deposits and it is concluded that minor physiographic disturbances on the otherwise flat abyssal plain floor have resulted in marked sedimentological variation. It was found that regular grain size decrease and thickness decrease with increasing distance from the supplying canyon were not observed for individual bedding units. The ruling notions about lateral variations within turbidites are questioned

Measurement and Assessment of Efficiency and Productivity in Kentucky State Government Services

Excerpt from the executive summary: This report examines the provision of a variety of government services within Kentucky. The provision of these public services, specifically the cost of providing these services is examined for the years 1992, 1997, and 2002. In addition, employment and salaries in government services are also examined. In addition to comparing costs within Kentucky during this period, the costs of providing public services are also compared to costs of the same government services by its neighboring states (Illinois, Indiana, Missouri, Ohio, Tennessee, Virginia, and West Virginia)

The Assignment and Division of the Tax Base in a System of Hierarchical Governments

The existence of either "horizontal" fiscal externalities, in which changes in one jurisdiction's policies affect the government budget of other jurisdictions and therefore the utility of its residents or "vertical" externalities, in which changes in one level of government's policies affect the budget of another level of government, may lead to non-optimal government policies. These fiscal externalities, then, suggest the possibility of corrective policies. The focus here is on vertical externalities. In a growing literature, these externalities are associated with the extent that tax bases are shared or "co-occupied" by two different levels of government. Given that co-occupancy is the cause of or at least exacerbates the externality, I consider, the optimal "assignment" of the tax base and, more specifically, whether the co-occupancy of tax bases is desirable. Specifically, I examine the optimal extent of the tax base of a lower level of government (local) and a higher level (state) in a hierarchical system of governments. The co-occupancy of the tax base influences the magnitude and possible the direction of "vertical" fiscal externalities associated with the taxes of one or both of the levels of government. Using a model in which there is a continuum of commodities, each with the same demand characteristics, I formally consider whether, as has been asserted in a number of studies, whether it is optimal to eliminate all co-occupancy between the tax bases of the two levels of government. While I find that it is indeed not optimal to have co-occupancy in the tax base in the absence of other corrective policies for the fiscal externality, eliminating co-occupancy does not, in general, eliminate fiscal externalities, meaning that tax rates can still be above or now below the socially-optimal level. Thus elimination of co-occupancy in the tax base is not a substitute for a policy such as intergovernmental matching grants which directly eliminates fiscal externalities. If alternative policies are available such as matching grants that do eliminate fiscal externalities and governments are restricted to set the same tax rate on all commodities in their base, the optimal division of the tax base changes dramatically -- optimality requires both governments tax the entire base. (JEL H77 - Intergovernmental Relations; Federalism)

Implementation of the NCTM STANDARDS by District: Chesterfield County Public Schools, Summary of Results

This report summarizes the responses of Chesterfield County teachers to Mathematics Instructional Practices in the Richmond Metropolitan Area, a survey which was distributed in March, 1993. This document is a supplement to the fall MERC report entitled Implementation of the NCTM STANDARDS in the Metropolitan Area: Final Report, and is intended for the use of Chesterfield administrators. Although designated to be self-explanatory, this supplement will likely be most useful to readers who are familiar with the full report