Abstract: While primarily publicly funded government entities, most public school districts receive private donations. I estimate how local school taxes crowd out private, voluntary contributions to public education. To do this, I exploit quasi-experimental variation in tax revenue stemming from local elections. I collect data from a large set of referenda in which local taxes face voter approval in four Midwestern states, combined with administrative records of the sources of school district revenues. Using a regression discontinuity design around voting thresholds that determine passage of local referenda, I show that private contributions to public school systems are not crowded out by local taxes. I can reject that a one dollar increase in taxes causes more than approximately a 1.5 cent decrease in private contributions.
“Optimal Fiscal Limits with Overrides” (with Stephen Coate) Revise & Resubmit, Journal of Public Economics
Abstract: This paper studies the optimal design of fiscal limits in the context of a simple political economy model. The model features a single politician and a representative citizen. The politician is responsible for choosing the level of taxation for the citizen but is biased in favor of higher taxes. The citizen sets a tax limit before his/her preferred level of taxation is fully known. The novel feature of the model is that the limit can be overridden, with the citizen's approval. The paper solves for the optimal limit and explores how it depends upon the degree of politician bias and the nature of the uncertainty concerning the citizen's preferred level of taxation. The paper also explains how the possibility of overrides impacts the optimal limit.