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Directions for state tax reform

Staff research paper

This paper by Owen Gabbitas and Damien Eldridge was released on 10 June 1998. The paper assesses four current areas of state taxation - payroll taxes, land taxes, financial taxes, and franchise fees - against four criteria - efficiency, equity, administration and compliance, and stability.

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The Productivity Commission has an ongoing interest in issues of microeconomic reform. One of its research themes has been the costs and benefits of reforms to date, and possible directions for future reform initiatives.

The staff research paper, Directions for State tax Reform, is part of this stream of research. The paper assesses four current areas of State taxation - payroll tax, land taxes, financial taxes and franchise fees - against four key criteria -efficiency, equity, administration and compliance, and stability. Against this background, it assesses some of the options that have been put forward for State tax reform.

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Cover, Copyright, Preface, Contents, Abbreviations, Glossary, Executive Summary


1 Scope of this study

2 The State tax mix
2.1 Main areas of taxation
2.2 Interstate differences in the tax mix
2.3 Conclusion

3 A framework for assessing State taxes
3.1 Efficiency
3.2 Equity
3.3 Administration and compliance costs
3.4 Stability of the tax base
3.5 Conclusion

4 An assessment of State taxes
4.1 Efficiency
4.2 Equity
4.3 Administration costs
4.4 Compliance costs
4.5 Stability of the tax base
4.6 Summary

5 Options for Reform
5.1 Improving existing State taxes
5.2 Changing the tax mix
5.3 Going beyond current State tax bases


6 Payroll Tax
6.1 Overview
6.2 Assessment

7 Taxes on Land
7.1 Overview
7.2 Assessment

8 Financial Taxes
8.1 Overview
8.2 Financial institutions duty
8.3 Bank account debits tax
8.4 Marketable securities duty
8.5 Loan security duty
8.6 Where to from here?

9 Franchise Fees
9.1 Overview
9.2 Petroleum products
9.3 Tobacco
9.4 Liquor


A Tax assignment in a federation
A.1 Introduction
A.2 Models of tax assignment
A.3 Practical considerations
A.4 Summary

B Measuring the efficiency of State Taxes
B.1 Different measures of efficiency loss
B.2 A partial equilibrium measure of marginal excess burden
B.3 Extensions to the basic model