Vertical externalities in tax setting: evidence from gasoline and cigarettes

Article Abstract:

Empirical evidence shows that independent tax setting results in vertical externalities in the economy. In an analysis of cigarette and gasoline tax rates covering the period 1975-1989, it was found that a substantial increase in state taxes occurs when the federal government increases tax rates. For instance, a 10-cent per gallon increase in the federal gasoline tax leads to a 3.2-cent increase in tax rates at the state level. This phenomenon confirms the interdependence of federal and state tax setting decisions.

Tax Law, Econometrics & Model Building, Models, Econometrics, Externalities (Economics), Gasoline, Cigarettes, Business models

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The inefficiency of the poll tax

Article Abstract:

The implementation of a poll tax or a uniform lump sum tax may prove to be disadvantageous to an economy. Based on various standard welfare criteria, a poll tax is most likely to fail in a second best economy, particularly in situations where uncertainty, incomplete markets and externalities are present. The aggregate willingness to pay for a shift from a uniform lump sum tax to an excise tax may be positive when there is adequate dispersion in tastes and income.

Taxes NEC, Economic aspects, Excise taxes, Excise tax, Poll tax

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