Federal Tax Policies, Congressional Voting, and Natural Resources

Canadian Journal of Economics, Forthcoming

54 Pages Posted: 27 Sep 2016 Last revised: 31 Dec 2019

See all articles by Fidel Perez‐Sebastian

Fidel Perez‐Sebastian

Universidad de Alicante - Department of Economic Analysis

Ohad Raveh

Hebrew University of Jerusalem

Date Written: November 20, 2018

Abstract

Can abundance of natural resources affect legislators' voting behavior over federal tax policies? We construct a political economy model of a federalized economy with district heterogeneity in natural resource abundance. The model shows that representatives of natural resource rich districts are more (less) willing to vote in favor of federal tax increases (decreases). This occurs because resource rich districts are less responsive to federal tax changes due to the immobile nature of their natural resources. We test the model's predictions using data on roll-call votes in the U.S. House of Representatives over the major federal tax bills initiated during the period of 1945-2003, in conjunction with the presence of active giant oil fields in U.S. Congressional districts. Our identification strategy rests on plausibly exogenous giant oil field discoveries and exploitation, and narrative-based aggregate federal tax shocks that are exogenous to individual Congressional districts and legislators. We find that: i) resource rich Congressional districts are less responsive to changes in federal taxes; ii) representatives of resource rich Congressional districts are more (less) supportive of federal tax increases (decreases), controlling for legislator, Congressional district, and state indicators. Our results indicate that resource richness is approximately half as dominant as the main determinant, namely party affiliation, in driving legislators' voting behavior over federal tax policies.

Keywords: Federal tax changes, voting behavior, federalism, natural resources

JEL Classification: D72, H77, Q32

Suggested Citation

Perez Sebastian, Fidel and Raveh, Ohad, Federal Tax Policies, Congressional Voting, and Natural Resources (November 20, 2018). Canadian Journal of Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2843610 or http://dx.doi.org/10.2139/ssrn.2843610

Fidel Perez Sebastian

Universidad de Alicante - Department of Economic Analysis ( email )

03080 Alicante
Spain

Ohad Raveh (Contact Author)

Hebrew University of Jerusalem ( email )

Mount Scopus
Jerusalem, 91905
Israel

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
54
Abstract Views
747
Rank
676,215
PlumX Metrics