Author

Eric H. Olds

Date of Award

12-2007

Level of Access

Campus-Only Thesis

Degree Name

Master of Arts (MA)

Department

Economics

Advisor

Philip A. Trostel

Second Committee Member

Kathleen P. Bell

Third Committee Member

Todd Gabe

Abstract

As the recent TABOR initiative in Maine and similar ones around the country indicate, there is a strong assumption that expenditure leads to taxes. However, expenditure has become less correlated with taxes in recent years. The research presented here examines a new measure of state and local government expenditure that is designed to more accurately reflect the tax burden. "Net" state and local government expenditure is calculated by subtracting non tax revenue from total expenditure for all government spending functions. This research demonstrates that net expenditure has become more correlated with taxes than has gross expenditure. Furthermore, analyzing expenditure in this way can make a substantial difference in terms of time trends and the relative importance of state and local government expenditure categories. For example, while public welfare expenditure has risen dramatically, net public welfare expenditure has remained flat as a percentage of personal income. This research also demonstrates how net expenditure can be used in econometric analysis to test how the tax burden imposed by individual spending categories responds to changes in demographic variables, federal grants, and other potential stimuli. An additional goal of this research is to make these data more accessible to other researchers

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