Horizontal and vertical indirect tax competition: theory and some evidence from the USA
Devereux, M. P., Lockwood, Ben and Redoano, Michela (2004) Horizontal and vertical indirect tax competition: theory and some evidence from the USA. Working Paper. Coventry: University of Warwick, Department of Economics. (Warwick economic research papers).
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This paper provides a simple theoretical framework for analyzing simultaneous vertical and horizontal competition in excise taxes, and estimates equations informed by the theory on a panel of US state and federal excise taxes on cigarettes and gasoline. We also examine the role played by smuggling. The results are generally consistent with the theory, when the characteristics of the markets for the goods are taken into account. For neither good do federal excise taxes affect state taxes. Taxes in neighboring states have a significant and large effect in the case of cigarettes, and a much weaker effect in the case of gasoline. we also find that in the setting of cigarette taxes, concerns about cross-border shopping play a more important role than concerns about smuggling.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HJ Public Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Taxation -- United States, Excise tax -- United States, Cross-border shopping -- United States, Smuggling -- United States -- Prevention|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||33|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
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