Tannenwald, R. "Are State and Local Revenue Systems Becoming Obsolete?" New

England Economic Review, Vol. 28, No. 4 (2001): 27 -- 43.

The context of Tannenwald's (2001) article was the growing potential obsolescence, or at least inefficiency, of traditional taxation schemes at the dawn of the 21st century. More specifically, Tannenwald (2001) argues for the need to transition away from state taxes in an era where taxable assets and transactions no longer have ties in the sense of the primary place of business to individual states.

The objective of the Tannenwald (2001) article was to propose alternate mechanisms that could achieve the traditional goals of state government taxation in a manner more appropriate to the realities of contemporary business.

Research Design, Setting, Participants

The research design used by Tannenwald (2001) consisted of empirical comparison and analyses of the following elements of state and federal taxation, in connection with which the setting consisted of existing tax mechanisms and the participants consisted of the individual states and the federal governments: (1) Percentage change in federal grants to state and local governments since 1960; (2) Relative mix of local and general tax revenues; (3) Relationship between state aide and state expenditures since 1982; (4) Change in the mix of consumer-purchased and business-purchased tax-preferred items; (5) Changes in consumption of taxed and tax-preferred items as a function of GDP since 1967; (6) Private-sector taxable transactions as a function of GDP; (7) Ratio of real property wealth to various other sectors at 10-year intervals; (8) Relative growth of tangible and intangible assets from 1977 to 1997; and (9) Changes in local and state tax burdens from 1959 to 2000.

Results/Findings

The results of the Tannenwald's (2001) data analyses suggest that the traditional state tax framework is no longer applicable to the realities of modern business and consumption.

Author's Conclusion

Tannenwald (2001) concludes that taxation schemes must change to adapt to the predominance of taxable services over taxable goods production, the amorphous nature of business location, and (especially) to the growing predominance of online taxable business.