Tax Policy

Tax Policy

Research

George R. Crowley | May 17, 2016
A new study for the Mercatus Center at George Mason University examines recent trends in state fiscal policy and details how well these efforts conform to widely accepted “best practices” in tax reform. It examines the tax and the expenditure patterns of five states and finds that, while there is no one correct way to enact economically beneficial tax reform, it is possible to discern some clear trends.
John A. Dove, Daniel J. Smith | Mar 22, 2016
Alabama currently lags behind its regional neighbors and the nation in economic growth and performance. This study undertakes a comprehensive analysis of Alabama's current fiscal situation as well as the reforms necessary to put Alabama on the road to economic prosperity.
Justin M. Ross, Olivia Gonzalez | Aug 11, 2015
Taxpayers and policymakers alike are drawing attention to opaque tax practices at the local level. Recent evidence suggests that local officials have the incentive to raise extra revenue through less transparent means and are channeling this revenue into assets for future spending. States have an opportunity to make their tax structure more transparent by adjusting tax rates following property reassessments and making the calculation of their property taxes clearer.
Justin M. Ross | Jun 23, 2015
An important concern to the efficiency of public finance systems is that voters suffer from various “fiscal illusions” that can politicians can exploit to expand the public sector. This paper contributes evidence of this effect on a public finance system through the revenue elasticity hypothesis, which is a form of fiscal illusion in which voters confuse tax rates with tax burdens in the approval of public spending. The applied empirical setting is Virginia cities and counties from 2001 to 2011, where the timing of mass property reappraisals is exogenous but known to local policymakers in setting the annual budget.
Adam J. Hoffer, Rejeana Gvillo, William F. Shughart II , Michael D. Thomas | Mar 03, 2015
This study provides a systematic analysis of selective consumption tax policy. We detail both the motivations behind selective consumption taxes and the policy’s shortcomings. Empirically, we explore how consumption of 12 goods—alcohol, cigarettes, fast food, items sold at vending machines, purchases of food away from home, cookies, cakes, chips, candy, donuts, bacon, and carbonated soft drinks—varies across the income distribution by calculating the goods’ income-expenditure elasticities.
Thomas Stratmann, Andreea Militaru, Rachel Reese | Aug 21, 2014
State and local governments often turn to increases in sales taxes to generate added revenue. Estimates of fresh revenue from the higher tax tend to be overly optimistic, partly because the number of sales tax exemptions tends to rise with the rising tax rate.

Testimony & Comments

Research Summaries & Toolkits

Expert Commentary

Jun 16, 2016

Between the 2015 and 2016 studies, twenty-two states improved their fiscal standing, twenty-two worsened, and six stayed the same.
Jun 01, 2016

The information is right in front of us, but if we don’t pay attention, we risk missing the warning signs of the next state or territorial fiscal crisis.
May 24, 2016

To better understand what it takes to pass comprehensive tax reform at the state level, new research published by the Mercatus Center at George Mason University examines five recent cases: Utah, Rhode Island, Michigan, Kansas and North Carolina.
Apr 13, 2016

The usual policies of tax expenditures, subsidies and other government handouts to businesses are generally ineffective at spurring economic growth, so states have little to lose by foregoing such strategies and focusing on simplicity and stability when it comes to economic policy.
Mar 22, 2016

Change won't occur overnight, but with wiser policies, Alabama will indeed have a bright and prosperous future to look forward to.
Jan 20, 2016

It's been almost 30 years since the last major federal tax system overhaul, and the chances of real reform in the next year look grim. But as usual, there's some hope in the states, and reformers may want to direct their efforts there.

Charts

State and local governments often increase sales taxes to generate additional revenue; however, projections of added revenue tend to be over-optimistic, in part because sales tax exemptions tend to increase along with the tax rate. These charts illustrate the relationship between average sales taxes and exemptions among the states (five states without sales taxes were removed, as was Hawaii because of its complex tiered system).

Experts

Podcasts

Eileen Norcross | October 08, 2015
Eileen Norcross discusses a recent op-ed on the need for transparency surrounding property tax increases in Virginia with Mike Schickman on WSVA.

Recent Events

Join us to discuss these questions: • Do TELs Limit Budget Growth? • What do states need to know before implementing a TEL? • How would a TEL affect your state? Matthew Mitchell, Research Fellow, Mercatus Center at George Mason University Assembly Member Micah Kellner, New York 65th District Nick Kasprak, Programmer and Analyst, Tax Foundation…

Media Clippings

Matthew Mitchell | Jul 28, 2013
The Governor’s Opportunity Fund — just one of numerous economic-incentive programs operated by the state — is something like a slush fund the governor can use to “secure a business location or expansion project.”…
Matthew Mitchell | Jul 11, 2013
[A]s my research has emphasized, privileges lead to a host of economic problems because they undermine competition, encourage wasteful privilege-seeking, and put politicians rather than consumers in charge of allocating capital and resources.
Jason J. Fichtner | Dec 05, 2012
Jason Fichtner cited at The Washington Times.
Eileen Norcross | Jul 11, 2012
Eileen Norcross is quoted in the guardian discussing the straining budgets of state and local governments in the U.S.
Antony Davies | Feb 19, 2012
Antony Davies explains why Nevada Gov. Brian Sandoval's economic development plan is a step in the wrong direction.
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