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Determinants of statutory tax rate changes by the Canadian provinces

Author

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  • Ergete Ferede
  • Bev Dahlby
  • Ebenezer Adjei
Abstract
Tax rate changes are some of the most significant and far-reaching decisions a government can take. In this paper we investigate the various fiscal and political factors that influence a government’s statutory tax rate change choices. We employ a multinomial logit model to empirically investigate the likelihood of changes to personal income tax, corporate income tax, and provincial sales tax rates by Canadian provincial governments over the period 1973–2010. Our results indicate that provincial governments that start with higher tax rates are more likely to cut, and less likely to raise, their tax rates. Another important implication of our results is that ideology matters—provinces with left-leaning governments are less likely to cut and more likely to raise their tax rates. The results are robust to various sensitivity checks. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Ergete Ferede & Bev Dahlby & Ebenezer Adjei, 2015. "Determinants of statutory tax rate changes by the Canadian provinces," Economics of Governance, Springer, vol. 16(1), pages 27-51, February.
    • Handle: RePEc:spr:ecogov:v:16:y:2015:i:1:p:27-51
    DOI: 10.1007/s10101-014-0153-6
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    Cited by:

    1. Josip Lesica, 2018. "Lobbying For Minimum Wages," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 2027-2057, October.
    2. Bram Mahieu & Benny Geys & Bruno Heyndels, 2017. "Fiscal Fairness as a Political Argument," Kyklos, Wiley Blackwell, vol. 70(4), pages 622-640, November.
    3. Saeed Solaymani, 2020. "Assessing the economic and social impacts of fiscal policies," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(3), pages 671-694, March.
    4. Ferede, Ergete & Dahlby, Bev, 2019. "The Effect of Corporate Income Tax on the Economic Growth Rates of the Canadian Provinces," SPP Technical Papers, The School of Public Policy, University of Calgary, vol. 12(29), September.
    5. Ergete Ferede, 2021. "Entrepreneurship and personal income tax: evidence from Canadian provinces," Small Business Economics, Springer, vol. 56(4), pages 1765-1781, April.

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    More about this item

    Keywords

    Optimal taxation; Tax reform; Tax competition; Fiscal federalism; H24; H25; H71; H77;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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