State Rules and City Money (Working Paper)

Author(s): McCabe, Barbara Coyle and Richard C. Feiock
Publication Date: September 2001

38 pages; Inventory ID WP01BM1; English


State Rules and City Money	189 KB

Abstract

Studies of state tax and expenditure limitations’ (TELs) effects on local fiscal choices have become increasingly sophisticated methodologically, but have relied on overly simplistic models of local fiscal behavior. This paper places TELs within a theory of intergovernmental institutions that considers how the effect of state rules is influenced by the design of local political institutions, and whether their effects erode over time.

This theoretical framework is tested by identifying the impacts of state rules, local political institutions, and service demand on property tax dependence in the nation’s large cities from 1975-1995. The pooled time series models were estimated using ordinary least squares with panel corrected standard errors. The results reported here demonstrate that different kinds of tax limits have different effects over time and that the form of municipal government significantly influences how certain state-level rules operate.