Working Paper: NBER ID: w16932
Authors: Daria Burnes; David Neumark; Michelle J. White
Abstract: We test the hypothesis that local government officials in jurisdictions that have higher local sales taxes are more likely to use fiscal zoning to attract retailing. We find that total retail employment is not significantly affected by local sales tax rates, but employment in big box and anchor stores is significantly increased in jurisdictions where sales tax rates increase. We also find that manufacturing employment is significantly lowered in these jurisdictions. These results suggest that local officials in jurisdictions with higher sales tax rates concentrate on attracting large stores and shopping centers and that their efforts crowd out manufacturing. A rise of one percentage point in a county-level local sales tax rate is predicted to result in 258 additional retail jobs and the loss of 838 manufacturing jobs.
Keywords: sales taxes; retail employment; manufacturing employment; fiscal zoning
JEL Codes: H71; J2; R52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local sales tax rates (H71) | total retail employment (L81) |
| local sales tax rates (H71) | employment in big box stores and department stores (L81) |
| local sales tax rates (H71) | manufacturing employment (L60) |