Should tax bases overlap in a federation with lobbying?
AbstractWe examine the tax assignment problem in a federation with two layers of government sharing an elastic tax base, in which Leviathan policy makers levy an excise tax in an imperfectly competitive market and producers lobby for tax rate cuts. If the lobby of producers is very influential on policy makers, we find that taxation by both layers of government might be optimal, provided that the market of the taxed good is highly concentrated; otherwise, it is optimal to assign the power to tax only to one level of government. Taxation by both layers of government is not optimal either when the influence of the lobby is weak, whatever the degree of market power. We also examine a richer set of tax setting outcomes, by considering the possibility that state policy makers have heterogeneous tax policy objectives.
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Bibliographic InfoPaper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/8.
Length: 28 pages
Date of creation: 2010
Date of revision:
vertical tax externalities; tax assignment; lobbying; specific taxation;
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-05-02 (Accounting & Auditing)
- NEP-ALL-2010-05-02 (All new papers)
- NEP-PBE-2010-05-02 (Public Economics)
- NEP-POL-2010-05-02 (Positive Political Economics)
- NEP-PUB-2010-05-02 (Public Finance)
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- Sandro Brusco & Luca Colombo & Umberto Galmarini, 2010.
"Local Governments Tax Autonomy, Lobbying, and Welfare,"
DISCE - Quaderni dell'Istituto di Economia e Finanza, UniversitÃ Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)
ief0097, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
- Sandro Brusco & Luca Colombo & Umberto Galmarini, 2010. "Local Governments Tax Autonomy, Lobbying, and Welfare," Department of Economics Working Papers, Stony Brook University, Department of Economics 10-01, Stony Brook University, Department of Economics.
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