The Editor of the National Tax Journal wishes to thank all those scholars who have

NATIONAL TAX ASSOCIATION- TAX INSTITUTE OF AMERICA Acknowledgement

The Editor of the National Tax Journal wishes to thank all those scholars who have generously participated in the review process over the last several years. Henry Aaron Charles Cook Ronald Grieson William Alberts Timothy Cook Shawna Grosskopf James Aim Joseph Cordes Alan Gustman Marcelle Arak Paul Courant Robert Hamada J. Richard Aronson Martin David Daniel Hamermesh Alan Auerbach David Davies David Hartman Roy Bahl Robert Deacon Robert Hartman Martin Baughman Larry DeBoer Joel Hasbrouck Marc Bendick Joseph DeSalvo Jerry Hausman Brian Bentick Peter Diamond Edgar Hayes Robert Berney Thomas DiLorenzo Paul Healy Richard Bird Paul Downing Walter Hellerstein Robert Bishop John Due William Hellmuth Boris Bittker Dan Durning Patrie Hendershott Alan Blinder Lowell Dworin Yolanda Henderson Howard Bloom Richard Dye Bernard Herber Dirán Bodenhorn Joseph Eckert Walter Hettich Michael Boskin Ron Ehrenberg Bert Hickman John Bowman Robert Eisner John Hilley Katharine Bradbury Laurie Ekstrand Werner Hirsch David Bradford Henry Färber Harold Hochman Gerard Brannon Daniel Feenberg Randall Holcombe Harvey Brazer John Fellingham R. Glenn Hubbard George Break Seymour Fiekowsky Charles Hulten Donald Brean William Fischel David Hyman Geoffrey Brennan Ronald Fisher Saul Hymans Michael Brennan James Follain Keith Ihlanfeldt Benjamin Bridges Roger Folsom Robert Inman Roger Brinner Peter Fortune Glenn Jenkins E. Cary Brown Edward Foster Bernard Jump Eleanor Brown William Fox Edward Kane Edgar Browning Jeffrey Frankel Harry Katz O. H. Brownlee Eric Fredland Martin Katzman Jan Brueckner Ann Friedlaender George Kaufman James Buchanan Don Fullerton Daphne Kenyon Robert Buckley Harvey Galper David Kiefer Richard Burkhauser James Gammiii Donald Kiefer Gary Burtless Vincent Geraci W. David Klemperer

Phillip Cagan J. Fred Giertz Timothy Koch Dennis Carlton Malcolm Gillis Thomas Kochan Karl Case Steven Gold Laurence Kotlikoff Howard Chernick Richard Goode Michael Krashinsky Albert Church Laurie Goodman Helen Ladd

Jack Citrin Roger Gordon Robert Lake Charles Clotfelter Edward Grämlich Dean Leimer Richard Cohn Jane Gravelle Donald Lessard Robert Conrad David Greytak Jane Leuthold

Wilbur Lewellen Benjamin Okner Larry Sgontz James Long Oliver Oldman David Sjoquist

Stephen Long Attiat Ott Jonathan Skinner Michael Lovell James Paddock Joel Slemrod Arthur Lynn, Jr. Leslie Papke Eugene Smolensky Paul McDaniel John Parsons Michael Spicer

Stephen McDonald E. C. Pasour, Jr. Jerrold Stern

Gerald McDougall Joseph Pechman Eugene Steuerle

William McEachern George Perkins Frederick Stocker Martin McGuire John Peterson Robert Strauss Richard McHugh Donald Phares Charles Stuart Michael Mclntyre Thomas Pogue Daniel Suits

Stephen McNees Karen Polenske Emil Sunley

Cathy Macsherry Henry Pollakowski Vito Tanzi Silvia Madeo James Poterba Paul Taubman Shlomo Maital Anil Puri Michael Taussig Paul Manchester John Quigley Wayne Thirsk

Gregory Mankiw Joseph Quinn Nicolaus Tideman Arthur Mann Robert Rasche Eric Toder Allan Manvell Edward Renshaw Raymond Torto Terry Marsh Andrew Reschovsky William Vickrey

Paul Menchik Morgan Reynolds George von Furstenberg

Peter Mieszkowski William Riley, Jr. Norman Walzer John Mikesell Steven Rock Alvin Warren David Mills Ronald Rogers Michael Wasylenko

Joseph Minarik Earl Rolph Kenneth Wertz

Jerry Miner Louis Rose John Whalley

W. Douglas Morgan Harvey Rosen William Wheaton John Mullahy Kenneth Rosen Michelle White Alicia Munnell John Ross David Wildasin Pfeggy Musgrave Richard Ruback Stanley Winer Richard Musgrave Daniel Rubinfeld Ann Witte John Mutti Ferdinand Schoettle Bernard Wolfman Will Myers Larry Schroeder Gary Wolfram William Neenan Eli Schwartz Mark Wolfson Nonna Noto Laurence Seidman Arthur Wright James Nunns Eli Shapiro John Yinger

William Oakland Perry Shapiro Joan Youngman

Wallace Oates Steven Shefírin Dennis Zimmerman Patricia O'Brien Carl Shoup George Zodrow

THE NATIONAL TAX TAX INSTITUTE OF AMERICA

ANNOUNCES

1986 Award Winners in the Annual Competition for outstanding Doctoral Dissertations in Government Finance and Taxation

CO-WINNERS: Andrew B. Lyon

How do Stock Prices Change When Corporate Tax Laws Change? An pirical Analysis of the Effect of Tax Laws on the Value of the Firm (Princeton University, now with the Joint Committee on Taxation, U.S. Congress)

Jeffrey K. Mackie-Mason

Dynamic Uncertainty, Taxes and Risky Investment Decisions: Theory and Application

(Massachusetts Institute of Technology, now at the University of gan)

NATIONAL TAX

JOURNAL

VOLUME XXXIX 1986

EDITOR: Daniel M. Holland

ASSOCIATE EDITOR: Arthur D. Lynn, Jr.

Assistant Editor: Sonia Trabun Arsove

NATIONAL TAX ASSOCIATION- TAX INSTITUTE OF AMERICA

Office of the Executive Director

21 East State Street

Columbus, Ohio 43215

Editorial Office: Sloan School of Management, M.I.T.

Room E52-445

ISSUES OF MARCH, JUNE SEPTEMBER, DECEMBER, 1986

1986 CUMULATIVE TABLE OF CONTENTS

Amnesty and Creative Tax Administration

Amnesties for State Tax Evaders: The Nature of and Response to Recent

Programs

Appraising the Funding Status of Teacher Pensions: An Econometric

Approach

Business Investment and Tax Policy: A Perspective on Existing Models

and Empirical Results

Civilization at a Discount: The Problem of Tax Evasion

Distributional Impacts of the Property Tax Revolt . . Dennis De Tray and Judith Fernandez 435

Effect of the President's Tax Reform on Charitable Giving,

The

Effective Tax Rates from Financial Statements . . Gillian M. Spooner 293 Effects of State Income Taxes on Fringe Benefit Demand of Policemen

and Firemen

Estimating Tax Interdependence; A Reply

and Susan C. Stephenson 249 Financing Universal Access in the Telephone Network

Fiscal Illusion from Intergovernmental Grants and the Level of State

and Federal Expenditures

Horizontal Equity and Property Taxation in Canada . . Ronald Meng and W. Irwin Gillespie 221

Impact of State Taxation on Life Insurance Company Growth,

The

Implementing Tax Reform: The Intergenerational Carryover

Problem

Inflation and the Distribution of the Corporate Income Tax Burden Inflation, Tax Rules, and the Price of Land Relative to

Capital

International Remedies and the Uniform Assessment of Property:

An Update and Extension

and William A. Butcher 157 International Tax Competition: Does it Make a Difference in Tax

Policy

Intersecting Tax Concentration Curves and the Measurement

of Tax Progressivity

and David Sykes 115 Intersecting Tax Concentration Curves and the Measurement of Tax

Interstate Tax Competition: A Comment

Interstate Tax Competition - The Need for a New Look

Interstate Tax Differentials, Tax Competition and Tax

Policy

Issues in the Measurement and Interpretation of Effective Tax

Rates

Land Versus Capital Value Taxation: A General Equilibrium

Analysis

Location and Investment Effects of a Tax Abatement

Program

Long View of Tax Reform, A

Long View of Tax Reform, A

Luncheon Speech

Measuring Differential Tax Liabilities and Their Implications for

Business Investment Location

and Leslie E. Papke 357

Miracles or Incrementalism

Modern Analysis of the Effects of Site Value Taxation, A

Non-Monetary Returns to Human Capital: Implications for

Temporal Tax Neutrality . . L. G . Sgontz and Thomas F. Pogue 201

On Taxation and Understated Monopoly Profits

and D wight R. Lee 241

Opening Remarks

Phase-Down of Social Security: The Transition in a Life Cycle Growth

Model, A

Premium and Discount Securities: Relative Tax Advantage Under the

Deficit Reduction Act of 1984

Laurie Goodman and Andrew Silver 65 Relationship Between 1RS Enforcement and Tax Yield, The

Remarks

Remarks Regarding Professor Witte's Paper

Reply to Professor Due

Role of Rainy Day Funds in Achieving Fiscal Stability, The

Some Economics of Tax Reform

State and Local Government Tax Expenditures Relating to the Federal

Government

State and Local Tax Deductibility and Metropolitan

Migration

Tax Amnesty: The Federal Perspective

Tax Competition and Federal Tax Deductibility . . . George F. Break 349

Tax Competition - Is What's Good for the Private Goose Also

Tax Expenditure Reporting: Closing the Loophole in State Budget

Oversight

Tax Incidence, Indirect Taxes and Transfers - A Comment

Tax Interdependence and the Importance of Using a Correctly Specified

Estimating Equation

Tax Reform Act of 1984 and Market Discount Bonds, The Tax Structure and thé Location of Economic Activity Along State

Borders

Test of the Perceived Fairness of the Actuarial Adjustment to Social

Security Benefits, A Timing of Taxes, The

Unobserved Tastes and the Determination of Municipal

Services

Use of Effective Tax Rates in Tax Policy, The User Charges as a Delegation Mechanism

CONTRIBUTORS

Arak, 65 Gravelle, 375 Papke, J., 357 Benker, 403 Hayn, 171 Papke, L., 357 Bernard, 171 Herzog, 189 Pogue, 201 Bezdek, 533 Hewett, 249 Pollock, 485 Bowman, 157 Hewitt, 471 Reese, 273 Bradford, 307 Hirsch, 211 Rose, 59 Brannon, 253, 277 Holtz-Eakin, 527 Rufolo, 211 Break, 349 Inman, 21 Schlottmann, 189 Browning, 541 Jackson, 317 Seidman, 97 Brueckner, 39 Jenkins, 35 Sgontz, 201 Butcher, 157 Kreutzer, 241 Shannon, 339 Calmus, 119 Lee, 241 Silver, 65 Chirinko, 137 Leitzel, 35 Singh, 109 De Tray, 435 Lerman, 325 Smith, 115 Dorgan, 281 Lindsey, 1 Spicer, 13 Due, 539 McConaghy, 265 Spooner, 293 Farmer, 229 McGuire, 367 Stephenson, 249 Fernandez, 435 McLure, 341 Stuart, 307 Follain, 451 Miyake, 451 Suyderhood, 485 Formby, 115 Montgomery, 79 Sykes, 115 Fox, 387 Malanaga, 333 Thomas, 109 Fullerton, 285 Meng, 221 Warren, 499 Gillespie, 221 Mikesell, 507 Wheaton, 85 Gillis, 35 Morse, 229 Wildasin, 353 Glickman, 269 Oosterhuis, 261 Witte, 255 Gohmann, 237 Riley, 79 Zampelli, 533 Goodman, 65 Ring, 245 Zodrow, 419

NATIONAL TAX ASSOCIATION- TAX INSTITUTE OF AMERICA

OBJECT. The National Tax Association - Tax Institute of America is a non-political, non-profit education

organization. Its object, as stated in its certificate of incorporation, is to educate and benefit its members and others by promoting the scientific study of taxation and public finance; by encouraging research; by collecting, preserving, and diffusing scientific information; by organizing conferences; by appointing committees for the investigation of special problems; by formulating and announcing, through the deliberately expressed opinion of its conferences, the best informed economic thought and administrative experience available; and by moting better understanding of the common interests of national, state and local governments in the United

States and elsewhere, in matters of taxation and public finance and interstate and international comity in

taxation.

MEMBERSHIPS. The Association welcomes to its membership, for mutual discussion and deliberation, all who may be interested in taxation and public finance. Please see the enclosed application forms for annual

membership dues and subscription rates.

OFFICERS AND BOARD OF DIRECTORS Elected Officers Robert D. Guy

PRESIDENT The Coca-Cola Company

Roy W. Bahl Atlanta, Georgia

Syracuse University R. L. Halperin

Syracuse, New York Tax Consultant VICE PRESIDENTS Augusta, Maine Richard W. Brust J- Elliott Hibbs

3M Company Arizona Department of Revenue St. Paul, Minnesota Phoenix, Arizona

Stuart W. Connock Frederic W. Hickman

Virginia Office of Administration & Finance Hopkins & Sutter Richmond, Virginia Chicago, Illinois

SECRETARY Oliver Oldman

Janet L. Staton Ha"ar^ .^aw fjhool Massachusetts . „

America Clark B Payne

Columbus, Ohio Southwestern Bell Telephone Company TREASURER St' Louis' Missouri

Arthur D Lvnn Jr Arthur C. Roemer

The Ohio State University Minnesota Department of Revenue

Columbus, Ohio St Pau1' Minnesota

d j c Tfc* i. David W. Shank

d Board j Ot c Tfc* Directors i. Northwest Pipeline Corporation PAST PRESIDENTS galt Lake City Utah

J. L. Merrill John Shannon

State of Oklahoma Advisory Commission on Intergovernmental Oklahoma City, Oklahoma Relations

John R. Mendenhall Washington, D.C.

Union Pacific Corporation Douglas Sharp

New York, New York Wichita State University

ELECTED MEMBERS Wichita, Kansas John R. Baldwin Neil P. Wissing

New Jersey Division of Taxation Weyerhaeuser Company Trenton, New Jersey Tacoma, Washington

Harvey Brazer HONORARY MEMBERS

The University of Michigan Richard M. Bird Ann Arbor, Michigan University of Toronto

Eleanor D. Craig Toronto, Ontario, Canada

University of Delaware Douglas J. Sherbaniuk Newark, Delaware Canadian Tax Foundation

Harvey Galper Toronto, Ontario, Canada Brookings Institution