DO TAXES ON SODA AND SUGARY DRINKS WORK? SCANNER DATA EVIDENCE FROM BERKELEY AND WASHINGTON STATE

We study two beverage taxes: the SSB tax of 1¢/oz in the city of Berkeley (in effect since 2015) and the temporary 2010 soda tax of 0.166¢/oz in Washington State. Using detailed scanner data, we find that prices in Washington reacted sharply and promptly (often by a larger magnitude than the tax), whereas retail prices in Berkeley reacted marginally (by less than 30% the magnitude of the tax). Further, we find a 5% volume reduction in Washington but fail to detect an effect in Berkeley. We discuss the possible causes for the discrepancy in effectiveness, in particular cross‐border shopping. (JEL H22, L66, I18)     

Just One Click Away: The Politics of E‐Commerce Sales Tax Policy

E‐commerce has altered the relationship between consumers, businesses, and U.S. states. E‐retailers are not required to collect sales tax from their customers, thus depriving fiscally insecure states of tax revenue, and providing a competitive advantage for e‐retailers, like Amazon Inc., in their struggle for market share with brick‐and‐mortar stores, like Walmart. Attempts at e‐commerce sales tax policy by state legislators and brick‐and‐mortar lobbyists failed until 2008 when New York successfully passed legislation. A subsequent wave of legislation ensued, and between 2008 and 2012, e‐commerce sales tax legislation left committee in fourteen states, each experiencing various levels of success. Existing explanatory efforts have not fully accounted for the combinatorial effect of political–institutional structure and market contestation in U.S. state‐level policy creation, as well as the likelihood of multiple pathways to passage. Embracing this framework, I use fuzzy set Qualitative Comparative Analysis (fsQCA) to uncover three sufficient pathways for successful passage of e‐commerce sales tax policy. Two paths highlight the confluence of large retailer pressure and a conductive political–institutional structure facing fiscal stress, while the third path reflects political–institutional forces. These findings corroborate, as well as build upon, our knowledge of fiscal sociology, policy domains, and corporate power in American politics.     

THE WELFARE EFFECTS OF TEMPORARY TAX CUTS AND SUBSIDIES: THEORY,ESTIMATION, AND APPLICATIONS

This article presents a tractable and intuitive theory on the welfare effects of temporary tax cuts and subsidies, fiscal policies that I generically term “holidays.” The Kaldor–Hicks efficiency effects are theoretically ambiguous, with competing pro‐ and anti‐efficiency effects on newly incentivized versus time‐shifted purchases. To rectify this ambiguity I derive expressions for the welfare effects that are consistent with constant elasticity assumptions and depend only upon readily and reliably observed information. To demonstrate the framework's broad applicability, I analyze two different policies: the 2009 Cash for Clunkers program and states' sales tax holidays. I estimate that both policies generated substantial deadweight loss. (JEL H21, H30, D91)     

(Unintended) Consequences of initiating an alcohol sales policy at college football stadiums: A case study

University officials are increasingly considering selling alcoholic beverages at campus football stadiums. To inform this decision, we report on offenses occurring at a campus football stadium and surrounding community on game day weekends between 2009 and 2013. Campus police log data for 35 home football weekends were examined, accounting for 1,940 distinct incidents. There was a general upward trend in crime incidents. On average, 330 total crime incidents occurred when alcohol was not sold (2009–2011) compared to 475 annually when alcohol was sold (2012–2013). Liquor law violations and alcohol consumption by a minor were the two most frequently cited offenses. Liquor law violations (317) was highest after alcohol sales initiated. Police incidents were markedly higher when playing a traditional football rival at home. College administrators, health officials, athletic departments, and local law enforcement must work together to weigh the potential benefit of enhanced financial profit against the risk of increased alcohol-related crime.     

POPULAR SUPPORT FOR TRADE AGREEMENTS AND PARTNER COUNTRY CHARACTERISTICS: EVIDENCE FROM AN UNEXPECTED ELECTION OUTCOME

Using quasi‐experimental data from a survey that was conducted immediately before and after the November 2016 presidential election, we analyze how the election of Donald Trump affected the willingness of Europeans to sign a trade and investment agreement with the United States. We find that the election outcome lead to an immediate and sizable negative effect on Europeans' image of the United States. But we do not find that, at the same time, there was a negative reaction in the willingness of Europeans to sign an agreement with the United States. (JEL F14, F55, C26, F50)     

The Impact of Uruguay's 2007 Tax Reform on Equity and Efficiency

In 2007, the Uruguayan government implemented a tax reform which introduced a new progressive labour income tax and a flat capital income tax, and reduced some indirect taxes, with the objective of improving fiscal balance, income distribution and economic growth. This article evaluates the impact of such tax reform on equity and efficiency on the basis of data derived from the Encuesta Continua de Hogares (ECH) for 2006 and 2009. Using a Difference‐in‐Differences technique, it shows that the new system reduced inequality by 2 Gini points without producing any discernible disincentive effect, suggesting that suitably designed reforms of direct taxation can simultaneously promote equity and efficiency.     

THE IMPACT OF RESTAURANT CALORIE LABELS ON FOOD CHOICE: RESULTS FROM A FIELD EXPERIMENT

Using field experiment data, we compare the effectiveness of calorie labels to a “fat tax” at reducing calories ordered. Results from a structural model of consumer demand show that numeric labels did not influence food choice, but symbolic traffic light labels caused restaurant patrons to select lower‐calorie menu items; thus, adding a traffic light symbol could enhance the effectiveness of the numeric calorie label (as currently proposed by the Food and Drug Administration). Additionally, our model projects that labels can both reduce intake more than a 10% tax on high‐calorie items and a 10% subsidy on low‐calorie items. (JEL Q18, I18)     

WHAT IS THE PROBABILITY YOUR VOTE WILL MAKE A DIFFERENCE?

One of the motivations for voting is that one vote can make a difference. In a presidential election, the probability that your vote is decisive is equal to the probability that your state is necessary for an electoral college win, times the probability the vote in your state is tied in that event. We computed these probabilities a week before the 2008 presidential election, using state‐by‐state election forecasts based on the latest polls. The states where a single vote was most likely to matter are New Mexico, Virginia, New Hampshire, and Colorado, where your vote had an approximate 1 in 10 million chance of determining the national election outcome. On average, a voter in America had a 1 in 60 million chance of being decisive in the presidential election. (JEL H0)     

State and Local Taxation of the Elderly

Using data from Massachusetts, this paper explores the impact of state and local taxes on the elderly. The combined tax burden from the state personal income and sales taxes and the local property tax are, on average, higher for the elderly than the nonelderly only for those with total incomes under $10,000 and over $75,000. High tax burdens on low-income elderly are primarily attributable to the property tax faced by homeowners. High-income elderly face high burdens because the state income tax rate on capital income is higher than the rate on earned income. Evidence suggests that public policies to reduce the property tax burdens on elderly homeowners have been largely ineffective.     

TIMING IS MONEY: DOES LUMP‐SUM PAYMENT OF THE EARNED INCOME TAX CREDIT AFFECT SAVINGS AND DEBT?

Earned income tax credit (EITC) benefit income is paid out in a lump‐sum around tax time. We investigate whether savings and debt among EITC‐eligible families reflect the timing of payments. Using nationally representative, individual‐level data on self‐reported debt and savings outcomes, we search for differences in monthly behavior between EITC‐eligible and ‐ineligible households. We find evidence that credit card and unsecured debt holding among EITC‐eligible families reflects the timing of the EITC, with low debt levels at tax time relative to other months. Debt holding among ineligible families with children does not exhibit a similar pattern. We find limited evidence of intrayear patterns in savings behavior among EITC‐eligible families. (JEL D14, I38, H23)     

CIGARETTE TAXES AND ILLICIT TRADE IN EUROPE

Cigarettes are highly taxed in Europe, but at higher prices some consumers substitute more toward illicit cigarettes. The illicit retail trade in cigarettes (IRTC) includes counterfeit, untaxed, and smuggled cigarettes. Some existing literature includes claims that taxes are not an important determinant of IRTC. Using data from the European Union, we find the opposite: raising prices leads to substantial increases in IRTC. A €1 increase in tax/pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29% to 95%. The results are robust to alternative specifications and data. (JEL I18, H26, K42)     

DO HIGHER TOBACCO TAXES REDUCE ADULT SMOKING? NEW EVIDENCE OF THE EFFECT OF RECENT CIGARETTE TAX INCREASES ON ADULT SMOKING

There is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption. However, evidence that tobacco taxes reduce adult smoking is relatively sparse. In this paper, we extend the literature in two ways: using data from the Current Population Survey Tobacco Use Supplements we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference‐in‐differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small, and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease smoking by as much as 5%. (JEL I18, I12)     

CORPORATE TAX POLICY AND INDUSTRY LOCATION WITH FULLY ENDOGENOUS PRODUCTIVITY GROWTH

This paper considers how national corporate tax policy affects productivity growth through adjustments in geographic patterns of industry in a two‐country model of trade. With trade costs and imperfect knowledge spillovers between countries, production concentrates partially and innovation concentrates fully in the country with the lowest tax rate. A rise in the international corporate tax differential accelerates productivity growth through an increase in the production share of the low‐tax country that improves knowledge spillovers from industry to innovation. The paper also investigates the relationship between the corporate tax differential and the level of market entry, and analytically characterizes the effects of changes in tax policy on national welfare. (JEL F43, O30, O40, R12)     

TAX RATES,GOVERNANCE, AND THE INFORMAL ECONOMY IN HIGH‐INCOME COUNTRIES

Approximately 16.7% of output in high‐income OECD (Organisation for Economic Cooperation and Development) countries is produced informally. I present a model economy where entrepreneurs decide how much of their production to keep informal. Informality carries a risk of getting caught, taxed, and fined. Results from a model with differences in tax rates alone only agree to approximately 23% with data on informality. Taking into account both governance quality and tax rates, agreement between the model's results and data increases to 72%. A policy experiment raising governance quality in Greece, Italy, Spain, and Portugal to Finnish standards reduces informality by 13 percentage points. (JEL E26, H26, J24)     

NONLINEARITIES AND THE SUSTAINABILITY OF THE GOVERNMENT'S INTERTEMPORAL BUDGET CONSTRAINT

We analyze the sustainability of the government's intertemporal budget constraint and the corresponding fiscal reaction function within a nonlinear error‐correction framework. Our empirical analysis, based on Italy, provides some evidence that the Italian government is meeting its intertemporal budget constraint. Nevertheless, we show that the burden of correcting budgetary disequilibria is entirely carried out by changes in the average tax rate, with a weakly exogenous government spending, possibly determined by the political process. We also document some rigidities of the tax instrument, in terms of downward inflexibility of the average tax rate with respect to its long‐run level. Finally, we provide some evidence in favor of a nonlinear adjustment toward a sustainable long‐run equilibrium, as the average tax rate adjusts faster the further away it gets from the equilibrium. By considering the behavior of taxes across the economic cycle, we also provide some evidence of inflexibility of the tax instrument during bad times. (JEL C32, C51, C52, H20, H50)     

THE CULTURE OF CORRUPTION,TAX EVASION,AND ECONOMIC GROWTH

This study uses a dynamic general equilibrium model to quantify the effects of corruption and tax evasion on fiscal policy and economic growth. The model is calibrated to match estimates of tax evasion in developing countries. The calibrated model is able to generate reasonable predictions for net tax rates, the corruption associated with public investment projects, and the negative correlation between corruption and tax revenue. The presence of corruption and evasion is shown to have significant, but not large, negative effects on economic growth. The relatively moderate effects help explain the absence of a robust negative correlation between growth and corruption in cross‐country data. The model also implies that cracking down on tax evasion before addressing corruption can be a bad idea and that higher wages for public officials can improve welfare. (JEL H3, O4)     

DUBIOUS AND DUBIOUSER: CONTINGENT VALUATION AND THE TIME OF DAY

We collect contingent valuation data from 524 student survey respondents over a 3‐day, 72‐hour period. Data analysis of a hypothetical campus referendum focuses on time‐of‐day effects on willingness to pay for a renewable energy project. We find that subjects responding to the survey during the night‐time hours (i.e., between 12 a.m. and 6 a.m.) do not display the law of demand, offering theoretically invalid responses to questions with important policy implications. Results from this research may have serious implications for the contingent valuation method (CVM). In short, just like your father said, nothing good happens after midnight when using the CVM. (JEL Q51)     

CORPORATE TAX GAMES WITH CROSS‐BORDER EXTERNALITIES FROM PUBLIC INFRASTRUCTURE

We construct a model of corporate tax competition in which governments also use public infrastructure investment to attract foreign direct investment, thus enhancing their tax bases. In doing so, we allow for cross‐border infrastructural externalities. Depending on the externality, governments are shown to strategically over‐ or underinvest in infrastructure. We also examine how tax cooperation influences investment in infrastructure and find that welfare may be lower under tax cooperation than under tax competition; this is the case when infrastructure is very effective in raising the tax base and generates a large negative cross‐border externality. (JEL F23, H40)     

MILITARY SPENDING AND THE GROWTH‐MAXIMIZING ALLOCATION OF PUBLIC CAPITAL: A CROSS‐COUNTRY EMPIRICAL ANALYSIS

In this paper we present an endogenous growth model to analyze the growth maximizing allocation of public investment among N different types of public capital. Using this general model of public capital formation, we analyze the stability of the long‐run equilibrium and we derive the growth‐maximizing values of the shares of public investment allocated to the different types of public capital, as well as the growth‐maximizing tax rate (amount of total public investment as a share of GDP). Then we proceed with an empirical investigation of the theoretical implication of the model that both the effects of the shares of public investment and the tax rate on the long‐run growth rate are non‐linear, following an inverse U‐shaped pattern. Using data of public investment in infrastructure and military capital formation, we derive empirical estimations that confirm the theoretical implications of the model. (JEL E62, H56, O40).     

BUYING THEIR VOTES? A STUDY OF LOCAL TAX‐PRICE DISCRIMINATION

A population's demographic composition may affect political support for various public services. This article examines whether the aging‐in‐place of local residents decreases financial support for public schools in the United States. I expand on previous empirical work by examining whether tax‐price reductions offered to elderly homeowners moderate their effect on local school revenues. The results reveal that an aging population structure substantially decreases school revenues, unless elderly homeowners receive state‐financed reductions in their local tax‐prices. Sizable differences hold even when comparing school districts located near each other but on opposite sides of state borders. Given the imminent aging of the population structure in the United States and many other developed countries, governments' targeted tax reduction policies could have important effects on equilibrium school revenues. (JEL I22, J14, H71)