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The consequences of overlapping tax bases for redistribution and public spending in a federation

  • Boadway, Robin
  • Marchand, Maurice
  • Vigneault, Marianne

Tax and expenditure policies are studied in a federation with imperfectly mobile households. States implement a linear progressive tax and supply a public good. A vertical ï¬scal externality, reflecting the effect of the state policies on federal revenues, provides an incentive to state taxes to be too progressive. A horizontal ï¬scal externality causes non-optimal states taxes and expenditures of the migration effect. The federal government implements its own linear progressive tax and makes transfers to the states. The federal government implements its own linear progressive tax and makes transfers to the states. The federal government can nullify both externalities by appropriate ï¬scal policies, and redistributive taxation can be decentralized to the states

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 68 (1998)
Issue (Month): 3 (June)
Pages: 453-478

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Handle: RePEc:eee:pubeco:v:68:y:1998:i:3:p:453-478
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Johnson, William R, 1988. "Income Redistribution in a Federal System," American Economic Review, American Economic Association, vol. 78(3), pages 570-73, June.
  2. Wildasin, David E, 1991. "Income Redistribution in a Common Labor Market," American Economic Review, American Economic Association, vol. 81(4), pages 757-74, September.
  3. Gordon, Roger H, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 567-86, November.
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  5. Myers & G.M., 1989. "Optimality, Free Mobility And The Regional Authority In Federation," Working Papers 10, John Deutsch Institute for the Study of Economic Policy.
  6. Robin Boadway and Michael Keen, . "Efficiency and the Optimal Direction of Federal-State Transfers," Economics Discussion Papers 445, University of Essex, Department of Economics.
  7. 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.
  8. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645 Elsevier.
  9. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  10. Bev Dahlby, 1996. "Fiscal externalities and the design of intergovernmental grants," International Tax and Public Finance, Springer, vol. 3(3), pages 397-412, July.
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