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Tax Competition, Income Differentials and Local Public Services

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  • Eric Smith

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  • Tracy Webb

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Abstract

This paper examines strategic tax setting between fiscal authorities in the presence of mobile workers who locate across these jurisdictions in response to differing tax structures and congestable local public amenities. We find that the nature of the tax setting outcomes depend crucially on the proximity between cities. For “distant” cities with the same size populations, the pressure on tax rates of a more mobile workforce depends on the whether mobile workers are net beneficiaries or net contributors. If mobile workers are either high or low income earners, cities lower tax rates. If mobile workers are middle income earners, cities raise tax rates. For “close” or neighbouring cities, workers locate in one of the cities and tax rates and local public amenities are dispersed. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Eric Smith & Tracy Webb, 2001. "Tax Competition, Income Differentials and Local Public Services," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 675-691, November.
  • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:675-691
    DOI: 10.1023/A:1012887009256
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    File URL: http://hdl.handle.net/10.1023/A:1012887009256
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    References listed on IDEAS

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    Cited by:

    1. Konstantinos J. Liapis & Christos L. Galanos & Evangelos D. Politis & Dimitrios D. Kantianis, 2014. "A Quantitative Approach to Measure Tax Competitiveness Between EU Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(3), pages 7-23, December.
    2. Konstantinos Liapis & Antonis Rovolis & Christos Galanos, 2012. "Toward a Common Tax Regime for the European Union Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 89-108.
    3. Konstantinos Liapis & Antonios Rovolis & Christos Galanos, 2013. "Toward a Common Tax Regime for the European Union Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 93-116.

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