This paper models for the first time a spatial process in local tax policies in the presence of centrally imposed fiscal limitations. Focusing on the frequently encountered case of a tax rate cap, we evaluate three empirical approaches to the analysis of spatially dependent limited tax policies: (i) a Bayesian spatial approach for censored dependent variables; (ii) a Tobit corner solution model augmented with a spatial lag; (iii) a spatial discrete hazard model. The evidence arising from an investigation of severely state-constrained local vehicle taxes in Italy suggests that ignoring tax limitations can lead to substantial underestimation of inter-jurisdictional fiscal interaction.
Tax-limited reaction functions
REVELLI, Federico
2013-01-01
Abstract
This paper models for the first time a spatial process in local tax policies in the presence of centrally imposed fiscal limitations. Focusing on the frequently encountered case of a tax rate cap, we evaluate three empirical approaches to the analysis of spatially dependent limited tax policies: (i) a Bayesian spatial approach for censored dependent variables; (ii) a Tobit corner solution model augmented with a spatial lag; (iii) a spatial discrete hazard model. The evidence arising from an investigation of severely state-constrained local vehicle taxes in Italy suggests that ignoring tax limitations can lead to substantial underestimation of inter-jurisdictional fiscal interaction.File | Dimensione | Formato | |
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