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

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  • BOADWAY, Robin
  • MARCHAND, Maurice
  • VIGNEAULT, Marianne

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
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Suggested Citation

  • BOADWAY, Robin & MARCHAND, Maurice & VIGNEAULT, Marianne, 1998. "The consequences of overlapping tax bases for redistribution and public spending in a federation," LIDAM Reprints CORE 1326, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1326
    DOI: 10.1016/S0047-2727(98)00018-8
    Note: In : Journal of Public Economics, 68, 453-478, 1998
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

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

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