@techreport{NBERw6517,
 title = "Vertical Externalities in Tax Setting: Evidence from Gasoline and Cigarettes",
 author = "Timothy J. Besley and Harvey S. Rosen",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6517",
 year = "1999",
 month = "March",
 URL = "http://www.nber.org/papers/w6517",
 abstract = {A common feature of federal systems is that tax bases are joint property.  Consequently, state and federal tax setting decisions are interdependent.  Our aim here is to put forward a rudimentary theoretical analysis of this phenomenon, and to use the theory as a framework for econometrically estimating the magnitude of the responses.  We find that when the federal government increases taxes, there is a significant positive response of state taxes.  For example, a 10-cent per gallon increase in the federal tax rate on gasoline leads to a 3.2-cent increase in the state tax rate.},
}