Advisor Information
Craig Maher
Location
UNO Criss Library, Room 249
Presentation Type
Oral Presentation
Start Date
3-3-2017 2:30 PM
End Date
3-3-2017 2:45 PM
Abstract
Nearly every state in the US imposes some form of limitation on local fiscal decisions – typically property taxes. The effects of tax and expenditure limitations (TELs) on fiscal outcomes have received significant attention by scholars, particularly since passage of California’s Proposition 13. The impact of TELs, however, remains an open empirical question, particularly at the municipal level. Do municipal governments with varying types of TELs, changing TEL structures, or no TELs experience different fiscal outcomes? Scholars and practitioners have attempted to answer these questions; however, the existing literature has at least two limitations. First, the extant literature fails to offer relevant theoretical explanations of the role of TELs in shaping municipal fiscal outcomes. Previous studies tend to rely on insufficient theoretical approaches which have certain drawbacks in developing research hypotheses. Second, even if municipal governments are faced with similar restrictions, the specific structure of such institutions may vary across entities and over time. Finally, existing literature has focused on measuring certain features of the limits – e.g., the presence of rules and overall restrictiveness – but has not fully captured institutional heterogeneity.
To fill these research gaps, this study aims to investigate how differently-designed TELs, defined as limitations imposed on the taxing and spending behavior of municipal governments, affect municipal government revenue structures. Drawing from game theory, I hypothesize that the strategy and payoff of key budget actors during the budget process may vary depending on the institutional design of municipal TELs, so that municipal revenue structures shaped by the collective decision of budget actors are likely to be differentiated. To test the research hypothesis, this study focuses on the period from 1982 to 2012 and reviews state constitutions and statutes as well as the extant TEL literature in order to identify how differently designed TELs have been imposed on municipal governments. As the measure of the key independent variables, a set of dummy variables is then employed to sort municipalities into different combinations of rule design (tentatively, 10 dichotomous variables). The dependent variables include revenue structure indicators such as per capita total revenues, property tax, other taxes, external aid and other revenue sources. Two-way fixed effects panel regression models are used for analysis.
This study is expected to make theoretical contributions as I attempt to invite a game theoretic framework to TELs and their impacts on municipal fiscal structure. The research findings are also expected to offer empirical evidence about the relationship between prominent fiscal rules and municipal revenues. Further, the empirical results can provide useful guidance for policy makers who want to design (or re-design) state-imposed TELs for intended fiscal outcomes at the municipal level.
Included in
Finance Commons, Policy Design, Analysis, and Evaluation Commons, Public Administration Commons
The Assessment of the Impacts of Differently-designed Tax and Expenditure Limitations (TELs) on Municipal Government Revenues: A Game Theoretic Approach
UNO Criss Library, Room 249
Nearly every state in the US imposes some form of limitation on local fiscal decisions – typically property taxes. The effects of tax and expenditure limitations (TELs) on fiscal outcomes have received significant attention by scholars, particularly since passage of California’s Proposition 13. The impact of TELs, however, remains an open empirical question, particularly at the municipal level. Do municipal governments with varying types of TELs, changing TEL structures, or no TELs experience different fiscal outcomes? Scholars and practitioners have attempted to answer these questions; however, the existing literature has at least two limitations. First, the extant literature fails to offer relevant theoretical explanations of the role of TELs in shaping municipal fiscal outcomes. Previous studies tend to rely on insufficient theoretical approaches which have certain drawbacks in developing research hypotheses. Second, even if municipal governments are faced with similar restrictions, the specific structure of such institutions may vary across entities and over time. Finally, existing literature has focused on measuring certain features of the limits – e.g., the presence of rules and overall restrictiveness – but has not fully captured institutional heterogeneity.
To fill these research gaps, this study aims to investigate how differently-designed TELs, defined as limitations imposed on the taxing and spending behavior of municipal governments, affect municipal government revenue structures. Drawing from game theory, I hypothesize that the strategy and payoff of key budget actors during the budget process may vary depending on the institutional design of municipal TELs, so that municipal revenue structures shaped by the collective decision of budget actors are likely to be differentiated. To test the research hypothesis, this study focuses on the period from 1982 to 2012 and reviews state constitutions and statutes as well as the extant TEL literature in order to identify how differently designed TELs have been imposed on municipal governments. As the measure of the key independent variables, a set of dummy variables is then employed to sort municipalities into different combinations of rule design (tentatively, 10 dichotomous variables). The dependent variables include revenue structure indicators such as per capita total revenues, property tax, other taxes, external aid and other revenue sources. Two-way fixed effects panel regression models are used for analysis.
This study is expected to make theoretical contributions as I attempt to invite a game theoretic framework to TELs and their impacts on municipal fiscal structure. The research findings are also expected to offer empirical evidence about the relationship between prominent fiscal rules and municipal revenues. Further, the empirical results can provide useful guidance for policy makers who want to design (or re-design) state-imposed TELs for intended fiscal outcomes at the municipal level.