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State Fiscal Structure and Economic Development Policy
Author(s) -
Gerking Shelby,
Morgan William
Publication year - 1998
Publication title -
growth and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.657
H-Index - 55
eISSN - 1468-2257
pISSN - 0017-4815
DOI - 10.1111/1468-2257.00079
Subject(s) - liberian dollar , incentive , economics , public economics , public service , state (computer science) , politics , fiscal policy , economic policy , subsidy , service (business) , public policy , personal income , point (geometry) , business , market economy , economic growth , monetary economics , finance , economy , algorithm , political science , computer science , law , geometry , mathematics
This essay adds a new dimension to the debate concerning taxes and business location decisions by raising a simple, but perhaps underappreciated point concerning political implications of state and local fiscal structure for state economic development policy. Low taxes may well be attractive to business owners and their employees; however, a fiscal structure that is not incentive‐compatible with economic expansion may end up frustrating public policies of all types aimed at promoting growth. Economic growth may be seen as increasing types aimed at promoting growth. Economic growth may be seen as increasing demands for public services, thereby placing upward pressure on tax rates faced by the original taxpayers. In Wyoming, this problem is compounded because the tax base is narrow and highly income inelastic and the incidence of taxes levied falls significantly on out‐of‐state residents who do not benefit from public services provided. Additionally, prospects for reducing the mismatch between taxpayers and public service beneficiaries appear to be limited because, quite understandably, state residents do not wish to pay more for public services for which they have historically paid cents on the dollar.