State Revenue Policy and Election: Are All Taxpayers Equal?

ABSTRACT

Political Business Cycle (PBC) models illustrate that government fiscal outcomes are driven by the private interests of incumbent policymakers who shape fiscal policy in pursuit of the popular vote. While the existing PBC studies tend to focus on influences on the overall budget size, this study posits that PBC also targets specific groups that can be distinguished by their size and associated tax bases. This research, using fiscal data of state governments in the US between 1979 and 2019, provides evidence that the conventional PBC patterns apply to the general public standing for the broad-based revenues, whereas the narrow-based revenues for the interest groups, businesses, and industries remain unaffected.

KEYWORDS:

• Political business cycle
• state election
• revenue policy
• interest group politics

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Fees and charges are unlikely levied taxes as the users can choose the level of access and consumption of public goods and services whereas the policymakers can determine the rates.

2. The targeted policy manipulation theory of this study can be tested on the property tax at the local level.