The Tax Gradient: Spatial Aspects of Fiscal Competition

By David R. Agrawal. Social Science Research Network, 2015

123 citations recorded by the source corpus.

State borders create a discontinuous tax treatment of retail sales. In a Nash game, local tax rates will be higher on the low-state-tax side of a border. Local taxes will decrease from the nearest high-tax border and increase from the low-tax border. Using driving time from state borders and all local sales tax rates, local tax rates on the low-tax side of the border are 1.25 percentage points higher, reducing the differential in state tax rates by over three-quarters. A ten minute increase in driving time from the nearest high-tax state lowers a border town’s local tax rate by 6%.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/98888ea4d892648a7070ca2120d9facd586a8179