NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing?

Daria Burnes, David Neumark, Michelle J. White

NBER Working Paper No. 16932
Issued in April 2011
NBER Program(s):   LS   PE

We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is significantly increased in jurisdictions where sales tax rates increase. We also find that manufacturing employment is significantly lowered in these jurisdictions. These results suggest that local officials in jurisdictions with higher sales tax rates concentrate on attracting large stores and shopping centers and that their efforts crowd out manufacturing. A rise of one percentage point in a county-level local sales tax rate is predicted to result in 258 additional retail jobs and the loss of 838 manufacturing jobs.

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This paper was revised on December 5, 2012

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Document Object Identifier (DOI): 10.3386/w16932

Burnes, Daria, David Neumark, and Michelle White, “Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing,” forthcoming in National Tax Journal.

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