Tax Exporting

AAA

DEFINITION of 'Tax Exporting'

The raising of revenue for one jurisdiction through the levying of taxes on residents of another jurisdiction. This means nonresidents pay for a share of the public services they benefit from while visiting another state. Without tax exporting, residents would pay for public service provision to visiting nonresidents. However, tax exporting can also discourage nonresidents from visiting another state if its tax exporting policy makes the activities they want to enjoy too expensive.

INVESTOPEDIA EXPLAINS 'Tax Exporting'

Examples of tax exporting:

  • Out-of-state visitors gambling in Las Vegas  pay taxes that benefit the state of Nevada and its residents.
  • Out-of-state visitors to California pay hotel taxes and other tourist taxes that benefit residents of California cities.
  • Homestead exemptions, which lower property taxes for owner-occupant homeowners, shift the property tax burden to homeowners who don’t occupy their properties, some of whom are out-of-state investors (especially in popular travel destinations). The taxes are therefore "exported" to homeowners who live out of state.

Tax exporting has negative effects on the nonresidents who pay the taxes, and potentially on their home states. If Janet, a resident of California, spends more when she goes to Las Vegas (because of gambling taxes), she will have less money to spend at businesses in California, and she will pay less California sales tax as a result. Both businesses and the state treasury in California may take in less revenue because of Nevada’s tax exporting.

While voters may support tax exporting (they’re seemingly approving a tax that they won’t have to pay), certain tax exporting strategies, such as taxing tourism, mean state residents still end up paying higher taxes, because people often travel within their home states. Tax exporters must strike a delicate balance between raising revenue and not discouraging nonresidents and residents from partaking in the taxable activity.

RELATED TERMS
  1. Mass Merchandising

    A method of selling insurance policies in which an employer or ...
  2. Reinsurance Ticket

    A notification made by an insurer which discloses the different ...
  3. Shortfall Cover

    A reinsurance agreement used to temporarily reduce gaps in an ...
  4. Securities-Based Lending

    The practice of making loans using securities as collateral. ...
  5. Gross Net Written Premium Income

    The amount of an insurance company’s premiums used to determine ...
  6. Extra-Contractual Obligations (ECO) ...

    A clause in a reinsurance contract requiring a reinsurer to pay ...
RELATED FAQS
  1. How often should a small business owner go through a bank reconciliation process?

    Small business owners should go through the bank reconciliation process at least monthly, and many business consultants recommend ... Read Full Answer >>
  2. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
  3. Why is a company's Cash Flow from Financing (CFF) important to both investors and ...

    A company's cash flow from financing activities (CFF) is important to investors and creditors because it depicts how much ... Read Full Answer >>
  4. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  5. How is trading volume regulated by the Securities and Exchange Commission (SEC)?

    The U.S. Securities and Exchange Commission (SEC) has trading volume as a requirement for selling securities that are otherwise ... Read Full Answer >>
  6. How do a corporation's shareholders influence its Board of Directors?

    The 21st century has seen a rapid increase in shareholder activism, such as the general awareness, involvement and influence ... Read Full Answer >>
Related Articles
  1. Investing

    The Number One Reason Why Most Traders Fail

    We show you the simple tools, availble to everyone, to succeed as an active trader: education, experience, charts, vision, and risk management systems.
  2. Investing

    Is There Still Opportunity in Japanese Stocks?

    Japanese stocks’ strong performance has prompted market watchers to question whether there’s still a case for adding exposure to the Land of the Rising Sun
  3. Investing Basics

    Is Divestment Destroying The Coal Industry?

    Should you worry about your investments in coal companies due to coal divestment campaigns? Investopedia explores the impact of protest divestment on the coal industry.
  4. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.
  5. Entrepreneurship

    Netflix's New Strategy: Penetrate Your Hotel Room

    Will Netflix’s new venture—to offer its media content in hotels—pay dividends? Investopedia explores the business potential and related developments.
  6. Credit & Loans

    Why Securities-Based Lending Became A Big Business

    Securities-based lending—using one's investments as collateral to secure a loan—has become big business for brokers and banks. Should we be concerned about its increasing popularity?
  7. Economics

    How Does China Manage Its Money Supply?

    Here's how the Central Bank of China manages its currency rates and the money supply.
  8. Forex Strategies

    Three Currencies Benefiting From Low Oil Prices

    The Indian rupee is clearly the biggest beneficiary of the slide in oil prices, followed by the Indonesian rupiah and British pound.
  9. Mutual Funds & ETFs

    ETF Analysis: Market Vectors Pharmaceutical

    Read about one of the best-performing ETFs in the health care sector since 2012: the Market Vectors Pharmaceutical ETF (PPH) by Van Eck Associates.
  10. Fundamental Analysis

    American Express Returns Vs. DJ Industrial Average

    American Express has handily outperformed the Dow Jones Industrial Average since 2009, but unusual weakness in the last year is taking its toll.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!