Federal Tax Competition and the Efficiency Consequences for Local Taxation of Revenue Equalization
Recent work has shown that a system of equalization grants can limit tax competition among lower-level governments. The structure of such models, however, does not allow for the federal to be an active player but its role is being limited in the administration of the equalization grants. The implication of this is that potentially important, for the efficiency properties of lower-level government taxation, vertical fiscal externalities are ignored. This paper introduces equalization grants into a standard federal capital tax competition model in which fiscal externalities arise not only horizontally, between jurisdictions, but also vertically between the levels of government. It is shown that, even in the presence of vertical fiscal inefficiencies, efficiency in the level of lower-level government taxation can be achieved by a modifying version of a standard equalization grant formula.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Streatham Court, Rennes Drive, Exeter EX4 4PU|
Phone: (01392) 263218
Fax: (01392) 263242
Web page: http://business-school.exeter.ac.uk/about/departments/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Buettner, Thiess & Hauptmeier, Sebastian & Schwager, Robert, 2006.
"Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany,"
ZEW Discussion Papers
06-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Thiess Buettner & Robert Schwager & Sebastian Hauptmeier, 2011. "Efficient Revenue Sharing and Upper-Level Governments: Theory and Application to Germany," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 647-667, December.
- Thiess Büttner & Sebastian Hauptmeier & Robert Schwager, 2006. "Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany," CESifo Working Paper Series 1656, CESifo Group Munich.
- Leonzio Rizzo, 2008.
"Local government responsiveness to federal transfers: theory and evidence,"
International Tax and Public Finance,
Springer, vol. 15(3), pages 316-337, June.
- Rizzo, Leonzio, 2006. "Local government responsiveness to federal transfers: theory and evidence," MPRA Paper 5373, University Library of Munich, Germany.
- Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509.
- Robin Boadway & Michael Keen, 1996.
"Efficiency and the optimal direction of federal-state transfers,"
International Tax and Public Finance,
Springer, vol. 3(2), pages 137-155, May.
- Boadway, R & Keen, M, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
- Sotiris Karkalakos & Christos Kotsogiannis, 2007. "A spatial analysis of provincial corporate income tax responses: evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 782-811, August.
- DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
- Michael Smart, 2007.
"Raising taxes through equalization,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 40(4), pages 1188-1212, November.
- Sam Bucovetsky & Michael Smart, 2006.
"The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 8(1), pages 119-144, 01.
- Sam Bucovetsky & Michael Smart, 2002. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," CESifo Working Paper Series 767, CESifo Group Munich.
- Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
- Michael J. Keen & Christos Kotsogiannis, 2002. "Does Federalism Lead to Excessively High Taxes?," American Economic Review, American Economic Association, vol. 92(1), pages 363-370, March.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:0701. 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: (Carlos Cortinhas)
If references are entirely missing, you can add them using this form.