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Tax Competition and the Choice of Tax Structure in a Majority Voting Model

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  • Rainald Borck

Abstract

This note studies the choice of tax structure in a majority voting model with tax competition. Regions may tax mobile capital or immobile labor. Individuals differ with respect to their relative endowments of labor and capital. Even though a lump sum tax is available, the equilibrium capital tax in a jurisdiction may be positive. In a symmetric equilibrium, this will be true if the median capital endowment is smaller than average.

Suggested Citation

  • Rainald Borck, 2003. "Tax Competition and the Choice of Tax Structure in a Majority Voting Model," Discussion Papers of DIW Berlin 335, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp335
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    Cited by:

    1. Hikaru Ogawa, 2007. "Strategic Taxation on Mobile Capital with Spillover Externality," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 33-45, March.
    2. Tadashi Morita & Yasuhiro Sato & Kazuhiro Yamamoto, 2016. "Demographics and tax competition in political economy," Discussion Papers in Economics and Business 16-13, Osaka University, Graduate School of Economics.
    3. Kangoh Lee, 2012. "Why is mobile capital taxed?," Journal of Economics, Springer, vol. 107(2), pages 157-181, October.
    4. Tadashi Morita & Yasuhiro Sato & Kazuhiro Yamamoto, 2020. "Demographics and competition for capital in political economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 865-889, August.
    5. Patricia Sanz‐Córdoba & Bernd Theilen, 2018. "Partial Tax Harmonization Through Infrastructure Coordination," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1399-1416, April.
    6. Rainald Borck, 2006. "Fiscal Competition, Capital-Skill Complementarity, and the Composition of Public Spending," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(4), pages 488-499, February.
    7. Janeba, Eckhard & Osterloh, Steffen, 2012. "Tax and the city: A theory of local tax competition and evidence for Germany," ZEW Discussion Papers 12-005, ZEW - Leibniz Centre for European Economic Research.
    8. Atsushi Yamagishi, 2019. "Transboundary pollution, tax competition and the efficiency of uncoordinated environmental regulation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1165-1194, August.
    9. Hikaru Ogawa & Taiki Susa, 2017. "Strategic delegation in asymmetric tax competition," Economics and Politics, Wiley Blackwell, vol. 29(3), pages 237-251, November.
    10. Gebhard Kirchgässner, 2004. "Die Bedeutung der Körperschaftssteuer: Theoretische Überlegungen, die internationale Entwicklung und die Situation in der Schweiz," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 59(03), pages 239-272, September.
    11. Janeba, Eckhard & Osterloh, Steffen, 2013. "Tax and the city — A theory of local tax competition," Journal of Public Economics, Elsevier, vol. 106(C), pages 89-100.
    12. Peralta, Susana & van Ypersele, Tanguy, 2006. "Coordination of capital taxation among asymmetric countries," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 708-726, November.
    13. Borck, Rainald & Pfluger, Michael, 2006. "Agglomeration and tax competition," European Economic Review, Elsevier, vol. 50(3), pages 647-668, April.
    14. Hikaru Ogawa & Taiki Susa, 2017. "Majority voting and endogenous timing in tax competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 397-415, June.
    15. Leonzio Rizzo, 2010. "Interaction between federal taxation and horizontal tax competition: theory and evidence from Canada," Public Choice, Springer, vol. 144(1), pages 369-387, July.
    16. Thomas Eichner, 2009. "On intermediate utility functions," Quality & Quantity: International Journal of Methodology, Springer, vol. 43(1), pages 155-159, January.
    17. Jorge Puig & Alberto Porto, 2022. "On the fiscal behavior of subnational governments. A long-term vision for Argentina," Asociación Argentina de Economía Política: Working Papers 4588, Asociación Argentina de Economía Política.
    18. Dae Jin Kim & In Kwon Park, 2017. "The local distribution of endowments matters: Modelling tax competition with heterogeneous local residents," Urban Studies, Urban Studies Journal Limited, vol. 54(14), pages 3239-3259, November.
    19. Holm-Hadulla, Fédéric, 2020. "Fiscal equalization and the tax structure," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    20. Jorge Pablo Puig & Alberto Porto, 2021. "On the interaction between own revenues and intergovernmental transfers. Evidence from Argentinean local governments," Asociación Argentina de Economía Política: Working Papers 4508, Asociación Argentina de Economía Política.
    21. Benny Geys & Steffen Osterloh, 2013. "Borders As Boundaries To Fiscal Policy Interactions? An Empirical Analysis Of Politicians’ Opinions On Rivals In The Competition For Firms," Journal of Regional Science, Wiley Blackwell, vol. 53(4), pages 583-606, October.

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    More about this item

    Keywords

    tax competition; voting;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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