TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, February 6, 2013

Galle Presents Does Federal Spending 'Coerce' States? Today at Toronto

Brian Galle (Boston College) Gallepresents Does Federal Spending “Coerce” States? Evidence from State Budgets at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:

According to a recent plurality of the U.S. Supreme Court, the danger that federal taxes will “crowd out” state revenues justifies aggressive judicial limits on the conditions attached to federal spending. Economic theory offers a number of reasons to believe the opposite: federal revenue increases may also float state boats. To test these competing claims, I examine for the first time the relationship between total federal revenues and state revenues. I find that, contra the NFIB plurality, increases in federal revenue -- controlling, of course, for economic performance and other factors -- are associated with a large and statistically significant increase in state revenues. This version of the study additionally provides extensive background explanations of underlying economic concepts for readers unfamiliar with the prior public finance literature.

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Here in Colorado it may be a simple "math" thing, as opposed to an "economic" thing: the state income tax form piggybacks on the federal AGI.

Posted by: ColoComment | Feb 6, 2013 3:27:09 PM

I don't have time to read the report, but I'm very suspicious of an author who reaches a conclusion contrary to common sense, as I am of any person trying to justify bigger and more expensive governments as part of a political agenda. Oh, did you note that the author was a visiting fellow at the left-wing Urban/Brookings Tax Policy Center?

Posted by: Woody | Feb 6, 2013 7:50:18 PM