Local government revenue stability and revenue policy over recessions

Yilin Hou, Jason S. Seligman

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In this chapter we consider the impacts of three recessions on local government revenues over the 1985–2009 period. We control for the timing of local government fiscal years and weight recession impacts accordingly. We also introduce a moving average (MA) of this weight as a substitute for traditional lags, interacting constructed weights with: (1) own source revenues and (2) other outside sources to control for feedback effects. After controlling for recessions, we find the introduction of sales taxes to be associated with increases in short-run revenue volatility. We find a smaller attenuating relationship for property taxes—millage rate increases are associated with roughly 5 % lower year-to-year volatility over periods of recession. Increases in revenue from temporary sales tax targeting capital projects are associated with both: (1) damped short-run volatility, and (2) increased long-run volatility by 2–3 % each. We also find suggestive evidence of statistical associations between revenue bond issuance over recessions, increases in lease purchase agreements, and increases in the local unemployment rate with increases in short- and longer-run revenue volatility.

Original languageEnglish (US)
Title of host publicationLocal Government Budget Stabilization: Explorations and Evidence
PublisherSpringer International Publishing
Pages95-120
Number of pages26
ISBN (Print)9783319151861, 9783319151854
DOIs
StatePublished - Jan 1 2015

ASJC Scopus subject areas

  • Social Sciences(all)

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    Hou, Y., & Seligman, J. S. (2015). Local government revenue stability and revenue policy over recessions. In Local Government Budget Stabilization: Explorations and Evidence (pp. 95-120). Springer International Publishing. https://doi.org/10.1007/978-3-319-15186-1_6