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

Author

Listed:
  • BOADWAY, Robin

    () (Queen's University)

  • MARCHAND, Maurice

    () (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

  • VIGNEAULT, Marianne

    () (Bishop's University)

Abstract

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 fiscal externality, reflecting the effect of the state policies on federal revenues, provides an incentive to state taxes to be too progressive. A horizontal fiscal 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 fiscal policies, and redistributive taxation can be decentralized to the states

Suggested Citation

  • BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," CORE Discussion Papers 1998003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1998003
    as

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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1998.html
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    References listed on IDEAS

    as
    1. Johnson, William R, 1988. "Income Redistribution in a Federal System," American Economic Review, American Economic Association, vol. 78(3), pages 570-573, June.
    2. Roger H. Gordon, 1983. "An Optimal Taxation Approach to Fiscal Federalism," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 567-586.
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    More about this item

    Keywords

    fiscal federalism; overlapping tax bases; redistribution policies;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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