TY - JOUR
T1 - The tax gradient
T2 - Spatial aspects of fiscal competition
AU - Agrawal, David R.
PY - 2015
Y1 - 2015
N2 - 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 lowtax 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 percent.
AB - 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 lowtax 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 percent.
UR - http://www.scopus.com/inward/record.url?scp=84928885794&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84928885794&partnerID=8YFLogxK
U2 - 10.1257/pol.20120360
DO - 10.1257/pol.20120360
M3 - Article
AN - SCOPUS:84928885794
SN - 1945-7731
VL - 7
SP - 1
EP - 29
JO - American Economic Journal: Economic Policy
JF - American Economic Journal: Economic Policy
IS - 2
ER -