Tax Effort as an Indicator of Fiscal Stress

Public Finance Quarterly, 1988, 16(2): 203-218

Posted: 27 Aug 2014

See all articles by Earl D. Benson

Earl D. Benson

Western Washington University - Finance and Marketing Department

Barry R. Marks

University of Houston, Clear Lake - School of Business and Public Administration

K. K. Raman

The University of Texas at San Antonio

Date Written: 1988

Abstract

The most visible credit market measure of the fiscal health of a municipality is the credit rating. In this article we ask whether the credit rating fully incorporates the fiscal stresses faced by municipal governments. We utilize state "tax effort" as a measure of the fiscal stress faced by a municipality. The findings suggest that municipalities located in states characterized by poor fiscal health pay higher than average interest costs on their bond issues (holding credit rating constant). State "tax effort" seems to reflect elements of fiscal stress that are not adequately taken into account through the rating process.

Keywords: Governments, tax effort, fiscal stress

JEL Classification: G18, L11, L15, l51, l80, M40, M41, M42, M48

Suggested Citation

Benson, Earl D. and Marks, Barry R. and Raman, K. K., Tax Effort as an Indicator of Fiscal Stress (1988). Public Finance Quarterly, 1988, 16(2): 203-218. Available at SSRN: https://ssrn.com/abstract=2487275

Earl D. Benson

Western Washington University - Finance and Marketing Department ( email )

FMDS Department MS 9077
Bellingham, WA 98225-9077
United States
360-650-3375 (Phone)
360-650-4844 (Fax)

Barry R. Marks

University of Houston, Clear Lake - School of Business and Public Administration ( email )

Houston, TX 77058
United States

K. K. Raman (Contact Author)

The University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-8749 (Phone)

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