IDEAS home Printed from https://ideas.repec.org/p/bsl/wpaper/2017-17.html
   My bibliography  Save this paper

Local income tax competition with progressive taxes and a fiscal equalization scheme

Author

Listed:
  • Kuhlmey, Florian

    (University of Basel)

Abstract

This paper develops a model of local income tax competition with a progressive tax scheme and a built-in fiscal equalization scheme. Both aspects are central to policy makers: The progressivity for equity reasons, and the fiscal equalization to prevent a race to the bottom and to limit the degree of segregation of households according to income. The model is calibrated to the metropolitan area of Zurich (Switzerland), and policy evaluations reveal that a progressive tax scheme as the basis for local tax competition causes strong segregating forces that can only to some extent be compensated by the fiscal equalization scheme.

Suggested Citation

  • Kuhlmey, Florian, 2017. "Local income tax competition with progressive taxes and a fiscal equalization scheme," Working papers 2017/17, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2017/17
    as

    Download full text from publisher

    File URL: https://edoc.unibas.ch/61301/1/20180306095821_5a9e582d11189.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen M. Calabrese & Dennis N. Epple & Richard E. Romano, 2012. "Inefficiencies from Metropolitan Political and Fiscal Decentralization: Failures of Tiebout Competition," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1081-1111.
    2. Calabrese, Stephen & Epple, Dennis & Romer, Thomas & Sieg, Holger, 2006. "Local public good provision: Voting, peer effects, and mobility," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 959-981, August.
    3. Kurt Schmidheiny, 2002. "Income Stratifcation in Multi-Community Models," Diskussionsschriften dp0215, Universitaet Bern, Departement Volkswirtschaft.
    4. Schmidheiny, Kurt, 2006. "Income segregation and local progressive taxation: Empirical evidence from Switzerland," Journal of Public Economics, Elsevier, vol. 90(3), pages 429-458, February.
    5. Gravel, Nicolas & Oddou, Rémy, 2014. "The segregative properties of endogenous jurisdiction formation with a land market," Journal of Public Economics, Elsevier, vol. 117(C), pages 15-27.
    6. Marcus Roller & Kurt Schmidheiny, 2016. "Effective Tax Rates and Effective Progressivity in a Fiscally Decentralized Country," CESifo Working Paper Series 5834, CESifo.
    7. Gravel, Nicolas & Thoron, Sylvie, 2007. "Does endogenous formation of jurisdictions lead to wealth-stratification?," Journal of Economic Theory, Elsevier, vol. 132(1), pages 569-583, January.
    8. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
    9. Stephen M. Calabrese, 2001. "Local Redistribution Financed by Income Tax," Public Finance Review, , vol. 29(4), pages 259-303, July.
    10. Schmidheiny, Kurt, 2006. "Income segregation from local income taxation when households differ in both preferences and incomes," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 270-299, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pan, Chen-Yu, 2020. "Protections from natural disasters as local public goods: Migration and local adaptations," Regional Science and Urban Economics, Elsevier, vol. 85(C).
    2. Brülhart, Marius & Bucovetsky, Sam & Schmidheiny, Kurt, 2015. "Taxes in Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1123-1196, Elsevier.
    3. Florian Kuhlmey & Beat Hintermann, 2019. "The welfare costs of Tiebout sorting with true public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(5), pages 1166-1210, October.
    4. Gravel, Nicolas & Oddou, Rémy, 2014. "The segregative properties of endogenous jurisdiction formation with a land market," Journal of Public Economics, Elsevier, vol. 117(C), pages 15-27.
    5. Florian Kuhlmey & Beat Hintermann, 2016. "Public Provision and Local Income Tax Competition," CESifo Working Paper Series 5789, CESifo.
    6. Roller, Marcus & Schmidheiny, Kurt, 2016. "Effective Tax Rates and Effective Progressivity in a Fiscally Decentralized Country," CEPR Discussion Papers 11152, C.E.P.R. Discussion Papers.
    7. Schmidheiny, Kurt, 2006. "Income segregation from local income taxation when households differ in both preferences and incomes," Regional Science and Urban Economics, Elsevier, vol. 36(2), pages 270-299, March.
    8. Sigrid Roehrs & David Stadelmann, 2010. "Mobility and local income redistribution," Working Papers 2010/4, Institut d'Economia de Barcelona (IEB).
    9. Christoph Basten & Maximilian Ehrlich & Andrea Lassmann, 2017. "Income Taxes, Sorting and the Costs of Housing: Evidence from Municipal Boundaries in Switzerland," Economic Journal, Royal Economic Society, vol. 0(601), pages 653-687, May.
    10. Roland Hodler & Kurt Schmidheiny, 2006. "How Fiscal Decentralization Flattens Progressive Taxes," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 281-304, June.
    11. Christoph Basten & Maximilian von Ehrlich & Andrea Lassmann, 2014. "Income Taxes, Sorting, and the Costs of Housing," KOF Working papers 14-362, KOF Swiss Economic Institute, ETH Zurich.
    12. De Fraja, Gianni & Martínez-Mora, Francisco, 2014. "The desegregating effect of school tracking," Journal of Urban Economics, Elsevier, vol. 80(C), pages 164-177.
    13. Schaltegger, Christoph A. & Somogyi, Frank & Sturm, Jan-Egbert, 2011. "Tax competition and income sorting: Evidence from the Zurich metropolitan area," European Journal of Political Economy, Elsevier, vol. 27(3), pages 455-470, September.
    14. Holmes, Thomas J. & Sieg, Holger, 2015. "Structural Estimation in Urban Economics," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 69-114, Elsevier.
    15. Dennis Epple & Brett Gordon & Holger Sieg, 2010. "Drs. Muth And Mills Meet Dr. Tiebout: Integrating Location‐Specific Amenities Into Multi‐Community Equilibrium Models," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 381-400, February.
    16. Sigrid Roehrs & David Stadelmann, 2010. "Mobility and local income redistribution," Working Papers 2010/4, Institut d'Economia de Barcelona (IEB).
    17. Epple, Dennis & Romano, Richard, 2015. "Equilibrium and efficient provision of local public goods with peer effects," Research in Economics, Elsevier, vol. 69(3), pages 291-319.
    18. Kuhlmey, Florian, 2017. "Income vs. property tax competition: A normative comparison," Working papers 2017/18, Faculty of Business and Economics - University of Basel.
    19. Kurt Schmidheiny, 2002. "Income Stratifcation in Multi-Community Models," Diskussionsschriften dp0215, Universitaet Bern, Departement Volkswirtschaft.
    20. H. Spencer Banzhaf & Kyle Mangum, 2019. "Capitalization as a Two-Part Tariff: The Role of Zoning," NBER Working Papers 25699, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Tax competition; income taxation; fiscal equalization; progressive taxation; segregation.;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bsl:wpaper:2017/17. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/wwzbsch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WWZ (email available below). General contact details of provider: https://edirc.repec.org/data/wwzbsch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.