A Survey of Sales Tax Exemptions in the States: Understanding Sales Taxes and Sales Tax Exemptions

42 Pages Posted: 7 Jun 2018

See all articles by Andreea Militaru

Andreea Militaru

Independent

Thomas Stratmann

George Mason University - Buchanan Center Political Economy; George Mason University - Mercatus Center; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 01/07/2014

Abstract

We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that each politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for this hypothesis. A one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent in the sales tax rate. Our results provide one explanation of why estimates of revenue increases generated by a sales tax increase are often too optimistic.

Suggested Citation

Militaru, Andreea and Stratmann, Thomas, A Survey of Sales Tax Exemptions in the States: Understanding Sales Taxes and Sales Tax Exemptions (01/07/2014). MERCATUS WORKING PAPER, Available at SSRN: https://ssrn.com/abstract=3191347 or http://dx.doi.org/10.2139/ssrn.3191347

Thomas Stratmann

George Mason University - Buchanan Center Political Economy ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-2330 (Phone)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://www.mercatus.org/scholars/thomas-stratmann

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
17
Abstract Views
270
PlumX Metrics