NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Federal Deductibility of State and Local Taxes: A Test of Public Choiceby Representative Government

Lawrence B. Lindsey

NBER Working Paper No. 2292
Issued in June 1987
NBER Program(s):   PE

This paper considers the impact of federal deductibility on the level and composition of state and local taxes. It also considers the importance of deductibility in determining the vote of state Congressional delegations on the Tax Reform Act of 1986. Particular emphasis should be placed on the mechanism by which voter preferences are translated into public choices. Alternative measures of tax price are considered; each represents a different model of voter behavior. The paper concludes that tax levels are determined by an equal weighting of voters, not by a planning mechanism which minimizes the cost of revenue statewide. It also concludes that the issue of state and local deductibility played a negligible role in determining Congressional votes on the recent tax reform bill.

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Document Object Identifier (DOI): 10.3386/w2292

Published: Federal Deductibility of State and Local Taxes: A Test of Public Choice by Representative Government, Lawrence Lindsey. in Fiscal Federalism: Quantitative Studies, Rosen. 1988

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