Taxation incentives and deadweight loss in a system of intergovernmental transfers
AbstractIntergovernmental transfer programs in many federal systems, including Canada, attempt to equalize differences in subnational jurisdictions' tax capacities on the basis of the so-called representative tax system (RTS). It is shown that RTS equalization grants effectively compensate local governments for a portion of the deadweight loss associated with taxes, and consequently the grants may tend to increase the distortionary tax rates chosen by local governments. This may be the case even when equalization is confined to tax bases which are themselves non-distortionary, such as the taxation of pure economic rents. These insights are then applied to a discussion of the design of an optimal revenue-sharing scheme for a federation, given the implementation constraints facing the central government.
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.
Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number msmart-96-03.
Length: 23 pages
Date of creation: 22 Jul 1996
Date of revision:
Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
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.:
- B. Dahlby & L. S. Wilson, 1994. "Fiscal Capacity, Tax Effort, and Optimal Equalization Grants," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 657-72, August.
- Mintz, Jack & Tulkens, Henry, 1986.
"Commodity tax competition between member states of a federation: equilibrium and efficiency,"
Journal of Public Economics,
Elsevier, vol. 29(2), pages 133-172, March.
- Mintz, J. & Tulkens, H., 1984. "Commodity tax competition between member states of a federation: equilibrium and efficiency," CORE Discussion Papers 1984027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Flatters, Frank & Henderson, Vernon & Mieszkowski, Peter, 1974. "Public goods, efficiency, and regional fiscal equalization," Journal of Public Economics, Elsevier, vol. 3(2), pages 99-112, May.
- Milgrom, Paul & Shannon, Chris, 1994.
"Monotone Comparative Statics,"
Econometric Society, vol. 62(1), pages 157-80, January.
- Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
- Thomas J. Courchene & David A. Beavis, 1973. "Federal-Provincial Tax Equalization: An Evaluation," Canadian Journal of Economics, Canadian Economics Association, vol. 6(4), pages 483-502, November.
- Boadway, Robin, 1982. "On the Method of Taxation and the Provision of Local Public Goods: Comment," American Economic Review, American Economic Association, vol. 72(4), pages 846-51, September.
- Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
- Santiago Lago Peñas, 2002. "Nivelación interterritorial e ineficiencia de las decisiones presupuestarias: reflexiones para el caso español," Hacienda Pública Española, IEF, vol. 162(3), pages 79-100, Â¨Septemb.
- Alejandro Esteller-Moré & Albert Solé-Ollé, 2002.
"Tax Setting in a Federal System: The Case of Personal Income Taxation in Canada,"
International Tax and Public Finance,
Springer, vol. 9(3), pages 235-257, May.
- Alejandro Esteller & Albert Solé, 2001. "Tax Setting in a Federal System: The Case of Personal Income Taxation in Canada," Working Papers 2001/9, Institut d'Economia de Barcelona (IEB).
- Muhammad Sabir, 2001. "Dynamic Consequences of the 1997 NFC Award: Provincial Social Sector Expenditures," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 967-984.
- S. Bucovetsky, 1997. "Insurance and Incentive Effects of Transfers among Regions: Equity and Efficiency," International Tax and Public Finance, Springer, vol. 4(4), pages 463-483, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer).
If references are entirely missing, you can add them using this form.