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Vertical Tax Externalities in the Theory of Fiscal Federalism

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  • Michael Keen

Abstract

Vertical tax externalities between levels of government can occur in federal structures, with responses to the tax policies of one level of government affecting the tax base of the other. Such effects mostly arise when federal and state governments co-occupy the same tax base. This paper examines these externalities by considering their implications for a range of issues in fiscal federalism: the relationship between state and federal tax rates, the equilibrium levels of these taxes, the relevance of experience in federal countries for policy design in international settings, intergovernmental grants, and the assignment of tax powers among levels of government.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 97/173.

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Length: 35
Date of creation: 01 Dec 1997
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Handle: RePEc:imf:imfwpa:97/173

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  1. Richard C. Cornes & Emilson C.D. Silva, 1996. "Transfers Between Jurisdictions with Private Information: The Equity/Efficiency Tradeoff," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 96/12, Department of Economics, Keele University.
  2. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, Springer, vol. 3(3), pages 397-412, July.
  3. Dahlby, Bev & Wilson, Leonard S., 2003. "Vertical fiscal externalities in a federation," Journal of Public Economics, Elsevier, Elsevier, vol. 87(5-6), pages 917-930, May.
  4. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, Elsevier, vol. 29(2), pages 133-172, March.
  5. WILDASIN, David E., . "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -831, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. 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, University of Chicago Press, vol. 95(4), pages 710-36, August.
  7. Myers, Gordon M., 1990. "Optimality, free mobility, and the regional authority in a federation," Journal of Public Economics, Elsevier, Elsevier, vol. 43(1), pages 107-121, October.
  8. Bordignon, Massimo & Manasse, Paolo & Tabellini, Guido, 1996. "Optimal Regional Redistribution Under Asymmetric Information," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1437, C.E.P.R. Discussion Papers.
  9. Cassing, J H & Hillman, A L, 1982. "State-Federal Resource Tax Rivalry: The Queensland Railway and the Federal Export Tax," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 58(162), pages 235-41, September.
  10. Johnson, William R, 1988. "Income Redistribution in a Federal System," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 570-73, June.
  11. Horst Raff & John Wilson, 1997. "Income Redistribution with Well-Informed Local Governments," International Tax and Public Finance, Springer, Springer, vol. 4(4), pages 407-427, November.
  12. 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, Canadian Economics Association, vol. 34(2), pages 481-503, May.
  13. repec:fth:louvco:9803 is not listed on IDEAS
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