This dissertation examines the effects of external economic conditions, particularly inflation, on state and local government taxing and expenditures decisions. Existing literature on state and local fiscal decisions focuses on the demographic and institutional characteristics of each governing jurisdiction as the primary determinants of tax structures and expenditure levels. There has also been some study of the effects of fluctuations in federal spending and the business cycle. Inflation is not incorporated explicitly in these studies I develop a model in which tax and expenditure decisions are based on a political objective function that minimizes costs of tax rate charges and costs of expenditure levels deviating from a hypothetical level determined without regard to tax change costs, subject to a budget constraint. Two types of taxes are modeled: those levied on an ad valorem basis, and those levied on a per unit basis. In the absence of tax rate changes, revenues from the ad valorem taxes keep up with inflation, while the purchasing power of per unit tax revenues dwindles due to inflation. Because decision-makers seek to limit costs from tax rate changes, they do not adjust per unit tax rates enough to prevent erosion of real per unit revenues. Consequently, real government expenditure levels are lowered by inflation and the revenue structure is altered toward heavier reliance on ad valorem revenue sources The theoretical implications of this model are expanded by simulations showing the extent of these effects under different hypothetical rates of inflation and federal aid growth, and under varying assumptions about the relative weights of these political costs The model is tested with econometric analysis of data aggregated by states for U.S. state and local governments from 1962 to 1982. The data are found to be consistent with the empirical implications of the model. Finally, local fiscal decision-making is analyzed in more detail through a case study of New Orleans' fiscal history during the period 1978-1988 / acase@tulane.edu
| Identifer | oai:union.ndltd.org:TULANE/oai:http://digitallibrary.tulane.edu/:tulane_23220 |
| Date | January 1989 |
| Contributors | Moomau, Pamela Hooper (Author), Oakland, William H (Thesis advisor) |
| Publisher | Tulane University |
| Source Sets | Tulane University |
| Language | English |
| Detected Language | English |
| Rights | Access requires a license to the Dissertations and Theses (ProQuest) database., Copyright is in accordance with U.S. Copyright law |
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