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Partisanship and tax competition in the American states

Published online by Cambridge University Press:  20 May 2015

John C. Davis  and
Sean Nicholson-Crotty
John C. Davis
Affiliation:
Department of Political Science, University of Arkansas at Monticello, USA E-mail: davis@uamont.edu
Sean Nicholson-Crotty
Affiliation:
School of Public and Environmental Affairs, Indiana University, USA E-mail: seanicho@indiana.edu
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Abstract

Existing research identifies partisan differences in taxing choices made by state governments. Research has also found that, even when controlling for intrastate characteristics such as party, jurisdictions respond to the taxing decisions of their neighbours, particularly when citizens can easily cross-border shop. These studies treat political and competitive factors as independent influences on taxes. We suggest they are more likely to interact in taxing decisions. We argue that the political costs of cross-border shopping are higher for Republicans, and the threat of it should have a greater negative impact on taxes when that party controls major state policy-making institutions. Our analyses of state cigarette taxes between 1980 and 2011 confirm that a higher threat of cross-border shopping has a larger negative impact on taxes under Republican governors. We conclude that, by missing the interaction between partisanship and the threat of fiscal mobility, previous work misestimates key influences on tax competition.

Keywords

cross-border shoppingpartisanshipstate politicstax competition
Type
Research Article
Information
Journal of Public Policy , Volume 36 , Issue 3 , September 2016 , pp. 437 - 456
Copyright
© Cambridge University Press, 2015 

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