Tax incentives in fiscal federalism: an integrated perspective
AbstractModels of fiscal federalism rarely account for the efficiency implications of intergovernmental fiscal ties for federal tax policy. This paper shows that fiscal institutions such that federal tax deductibility, vertical revenue-sharing, and fiscal equalization (being common features of existing federations) encourage local taxation, but may discourage federal taxation. Furthermore, the structure of public spending is skewed towards local spending. We also show that, when considering Leviathan governments, fiscal institutions reduce confiscatory taxation by the federal government. The result is contrary to the Cartelization Hypothesis (Brennan and Buchanan 1980). Finally, we characterize the efficient design of intergovernmental fiscal ties.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 43 (2010)
Issue (Month): 2 (May)
Contact details of provider:
Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
More information through EDIRC
Find related papers by JEL classification:
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- H1 - Public Economics - - Structure and Scope of Government
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509, December.
- Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
- Bev Dahlby & Jack Mintz & Sam Wilson, 2000. "The deductibility of provincial business taxes in a federation with vertical fiscal externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 677-694, August.
- Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
- Chirinko, Robert S. & Fazzari, Steven M. & Meyer, Andrew P., 1999. "How responsive is business capital formation to its user cost?: An exploration with micro data," Journal of Public Economics, Elsevier, vol. 74(1), pages 53-80, October.
- Thiess Buettner & Robert Schwager & Sebastian Hauptmeier, 2011.
"Efficient Revenue Sharing and Upper-Level Governments: Theory and Application to Germany,"
Journal of Institutional and Theoretical Economics (JITE),
Mohr Siebeck, Tübingen, vol. 167(4), pages 647-667, December.
- Buettner, Thiess & Hauptmeier, Sebastian & Schwager, Robert, 2006. "Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany," ZEW Discussion Papers 06-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Thiess Büttner & Sebastian Hauptmeier & Robert Schwager, 2006. "Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany," CESifo Working Paper Series 1656, CESifo Group Munich.
- Devereux, M.P. & Lockwood, B. & Redoano, M., 2007.
"Horizontal and vertical indirect tax competition: Theory and some evidence from the USA,"
Journal of Public Economics,
Elsevier, vol. 91(3-4), pages 451-479, April.
- Devereux, Michael & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal And Vertical Indirect Tax Competition : Theory And Some Evidence From The Usa," The Warwick Economics Research Paper Series (TWERPS) 704, University of Warwick, Department of Economics.
- Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal and Vertical Indirect Tax Competition: Theory and Some Evidence From the USA," CEPR Discussion Papers 4470, C.E.P.R. Discussion Papers.
- Martin Feldstein & Gilbert Metcalf, 1986.
"The Effect of Federal Tax Deductibility on State and Local Taxes and Spending,"
NBER Working Papers
1791, National Bureau of Economic Research, Inc.
- Feldstein, Martin S & Metcalf, Gilbert E, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 710-36, August.
- Metcalf, Gilbert & Feldstein, Martin, 1987. "The Effect of Federal Tax Deductibility on State and Local Taxes and Spending," Scholarly Articles 2766699, Harvard University Department of Economics.
- Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
- Michael Keen & Christos Kotsogiannis, 2003. "Leviathan and Capital Tax Competition in Federations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 177-199, 04.
- Egger, Peter & Koethenbuerger, Marko & Smart, Michael, 2010.
"Do fiscal transfers alleviate business tax competition? Evidence from Germany,"
Journal of Public Economics,
Elsevier, vol. 94(3-4), pages 235-246, April.
- Peter Egger & Marko Koethenbuerger & Michael Smart, 2007. "Do Fiscal Transfers Alleviate Business Tax Competition? Evidence from Germany," CESifo Working Paper Series 1955, CESifo Group Munich.
- Masayoshi Hayashi & Robin Boadway, 2001. "An empirical analysis of intergovernmental tax interaction: the case of business income taxes in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 481-503, May.
- Christos Kotsogiannis, 2007.
"Federal Tax Competition and the Efficiency Consequences for Local Taxation of Revenue Equalization,"
0701, Exeter University, Department of Economics.
- Christos Kotsogiannis, 2010. "Federal tax competition and the efficiency consequences for local taxation of revenue equalization," International Tax and Public Finance, Springer, vol. 17(1), pages 1-14, February.
- Sam Bucovetsky & Michael Smart, 2006.
"The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 8(1), pages 119-144, 01.
- Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
- Michael Smart, 2007.
"Raising Taxes through Equalization,"
CESifo Working Paper Series
1926, CESifo Group Munich.
- Sotiris Karkalakos & Christos Kotsogiannis, 2007. "A spatial analysis of provincial corporate income tax responses: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 782-811, August.
- Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 917-930, May.
- Riou, Stephane, 2006. "Transfer and tax competition in a system of hierarchical governments," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 249-269, March.
- Baskaran, Thushyanthan & Lopes da Fonseca, Mariana, 2013. "The economics and empirics of tax competition: A survey," Center for European, Governance and Economic Development Research Discussion Papers 163, University of Goettingen, Department of Economics.
- Lisa Grazzini & Alessandro Petretto, 2013. "Federalism with Bicameralism," Working Papers - Economics wp2013_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
- Baskaran, Thushyanthan, 2013. "Identifying local tax mimicking: Administrative borders and a policy reform," Center for European, Governance and Economic Development Research Discussion Papers 157, University of Goettingen, Department of Economics.
- Galle, Brian, 2014. "The effect of national revenues on sub-national revenues evidence from the U.S," International Review of Law and Economics, Elsevier, vol. 37(C), pages 147-155.
- Michael Keen & Kai A. Konrad, 2012. "International Tax Competition and Coordination," Working Papers international_tax_competi, Max Planck Institute for Tax Law and Public Finance.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.