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Guns vs. Taxes ? A Look at How Defense Spending Affects U.S. Federal Tax Policy
Author(s) -
CARROLL DEBORAH A.
Publication year - 2006
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2006.00862.x
Subject(s) - economics , tax policy , public economics , indirect tax , tax reform , state income tax , consumption (sociology) , direct tax , federal budget , value added tax , monetary economics , economic policy , finance , social science , sociology , fiscal year
Although studies have shown a theoretical and empirical link between defense spending and economic growth and between economic growth and tax policy, the impact of defense spending on federal tax policy remains largely unexplored. This paper proposes a theoretical model and empirical test to explore the direct and indirect effects of defense spending on federal tax policy. The findings suggest that consumption expenditures for national defense directly influence the federal corporate income tax rate. However, the analysis finds no indirect relationship between defense spending and federal tax policy mediated through economic growth.