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The allocation of the income tax among different levels of government: a theoretical solution

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Ponzano, Ferruccio ()

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Abstract

The purpose of this paper is to show how two competitive governments can simultaneously choose their income taxes. There are two different levels of government in competition: a central government and a local one. The problem is analysed starting from the Leviathan hypothesis and from the theory of incomplete contracts. We assume that a government includes its re-election in its utility function and study the allocation of the income tax rates between the two levels of government, free from any legal or regulatory constraint. We show that the governments are interested in meeting the re-election constraint, but this common interest does not generate an egalitarian allocation of the tax rates.

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Paper provided by Department of Public Policy and Public Choice - POLIS in its series P.O.L.I.S. department's Working Papers with number 40.

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Length: 23 pages
Date of creation: Oct 2004
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Handle: RePEc:uca:ucapdv:40

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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

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References listed on IDEAS
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.:
  1. Bissey, Marie-Edith & Canegallo, Claudia & Ortona, Guido & Scacciati, Francesco, 2003. "Competition vs. Cooperation. An Experimental Inquiry," P.O.L.I.S. department's Working Papers 37, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  2. Levaggi, Rosella & Zanola, Roberto, 2000. "The Flypaper Effect: Evidence from the Italian National Health System," P.O.L.I.S. department's Working Papers 10, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  3. Guido Ortona, 1999. "A weighted-voting electoral system that performs quite well," P.O.L.I.S. department's Working Papers 4, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  4. Montrucchio, Luigi & Privileggi, Fabio, 1999. "On Fragility of Bubbles in Equilibrium Asset Pricing Models of Lucas-Type," P.O.L.I.S. department's Working Papers 5, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  5. Ortona, Guido, 2002. "Choosing the electoral system: why not simply the best one?," P.O.L.I.S. department's Working Papers 30, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  6. Locatelli-Biey, Marilena & Zanola, Roberto, 2000. "The Market for Sculptures: an Adjacent Year Regression Index," P.O.L.I.S. department's Working Papers 14, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  7. Ferruccio Ponzano, 2001. "Efficiency wages and endogenous supervision technology," P.O.L.I.S. department's Working Papers 23, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  8. Bondonio, Daniele, 2002. "Evaluating the Employment Impact of Business Incentive Programs in EU Disadvantaged Areas. A case from Northern Italy," P.O.L.I.S. department's Working Papers 27, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  9. Guido Ortona, 2000. "On the Xenophobia of non-discriminated Ethnic Minorities," P.O.L.I.S. department's Working Papers 15, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  10. Bondonio, Daniele, 2001. "Evaluating Decentralized Policies: How to Compare the Performance of Economic Development Programs across Different Regions or States," P.O.L.I.S. department's Working Papers 16, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  11. Bissey, Marie-Edith & Ortona, Guido, 2002. "A simulative frame to study the integration of defectors in a cooperative setting," P.O.L.I.S. department's Working Papers 24, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  12. Amisano, Franco, 2002. "La corruzione amministrativa in una burocrazia di tipo concorrenziale: modelli di analisi economica," P.O.L.I.S. department's Working Papers 29, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  13. Marie-Edith Bissey & Mauro Carini & Guido Ortona, 2004. "ALEX3: a Simulation Program to Compare Electoral Systems," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 7. [Downloadable!]
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  14. Marchese, Carla & Privileggi, Fabio, 2001. "Who participates in tax amnesties? Self-selection of risk-averse taxpayers," P.O.L.I.S. department's Working Papers 21, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  15. Cassone, Alberto & Marchese, Carla, 2001. "Einaudi e i servizi pubblici, ovvero come contrastare i monopolisti predoni e la burocrazia corrotta," P.O.L.I.S. department's Working Papers 17, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  16. Cassone, Alberto & Marchese, Carla, 2001. "Should the death tax die? And should it leave an inheritance?," P.O.L.I.S. department's Working Papers 22, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  17. Marchese, Carla & Privileggi, Fabio, 1999. "Taxpayers Attitudes Toward Risk and Amnesty Participation: Economic Analysis and Evidence for the Italian Case," P.O.L.I.S. department's Working Papers 6, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  18. Mario Ferrero, 2005. "Radicalization as a reaction to failure: An economic model of Islamic extremism," Public Choice, Springer, vol. 122(1), pages 199-220, January. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Mitra, Tapan & Privileggi, Fabio, 2005. "Cantor Type Attractors in Stochastic Growth Models," P.O.L.I.S. department's Working Papers 43, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  2. Marchese, Carla, 2006. "Rewarding the consumer for curbing the evasion of commodity taxes?," P.O.L.I.S. department's Working Papers 72, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  3. Ramello, Giovanni B. & Silva, Francesco, 2006. "Appropriating signs and meaning: The elusive economics of trademark," P.O.L.I.S. department's Working Papers 70, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  4. Marchese, Carla & Privileggi, Fabio, 2007. "Increasing the efficiency of the 'Studi di Settore' might backfire," P.O.L.I.S. department's Working Papers 83, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  5. Ottone, Stefania & Ponzano, Ferruccio & Ricciuti, Roberto, 2007. "Simulating voting rule reforms for the Italian parliament. An economic perspective," P.O.L.I.S. department's Working Papers 88, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  6. Ortona, Guido, 2004. "Voting for the Electoral System: an Experiment," P.O.L.I.S. department's Working Papers 42, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  7. Cugno, Franco & Ottoz, Elisabetta, 2006. "Static inefficiency of compulsory licensing: Quantity vs. price competition," P.O.L.I.S. department's Working Papers 73, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  8. Bissey, Marie-Edith & Ortona, Guido, 2007. "The program for the simulation of electoral systems ALEX4.1: what it does and how to use it," P.O.L.I.S. department's Working Papers 82, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  9. Nicita, Antonio & Ramello, Giovanni B., 2006. "Property, liability and market power: The antitrust side of copyright," P.O.L.I.S. department's Working Papers 75, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  10. Ramello, Giovanni, 2006. "What's in a sign? Trademark law and enconomic theory," P.O.L.I.S. department's Working Papers 67, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  11. Ponzano, Ferruccio, 2005. "Competition among different levels of government: the re-election problem," P.O.L.I.S. department's Working Papers 47, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  12. Levaggi, Rosella & Montefiori, Marcello, 2005. "It takes three to tango: Soft budget constraint and cream skimming in the hospital care market," P.O.L.I.S. department's Working Papers 48, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
  13. Ottone, Stefania, 2005. "Transfers and Altruistic Punishments in Solomon's Game experiments," P.O.L.I.S. department's Working Papers 50, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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