Andreea Militaru
- Consultant, Public-Private Transaction Advisory Services at the International Finance Corporation
Andreea Militaru was a MA fellow at the Mercatus Center at George Mason University and is interested in financial regulation and monetary policy issues, as well as entrepreneurship and international development. She is currently a Consultant for Public-Private Transaction Advisory Services at the International Finance Corporation, a member of the World Bank Group.
Publications & Appearances
- | Academic & Student Programs Academic & Student Programs
- | Urban Economics Urban Economics
- | Policy Briefs Policy Briefs
Sales Taxes and Exemptions
State and local governments often turn to increases in sales taxes to generate added revenue. Estimates of fresh revenue from the higher tax tend to be overly optimistic, partly because the number of sales tax exemptions tends to rise with the rising tax rate.
- | Academic & Student Programs Academic & Student Programs
- | Corporate Welfare Corporate Welfare
- | Working Papers Working Papers
A Survey of Sales Tax Exemptions in the States: Understanding Sales Taxes and Sales Tax Exemptions
We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that each politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for this hypothesis. A one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent in the sales tax rate. Our results provide one explanation of why estimates of revenue increases generated by a sales tax increase are often too optimistic.