Ad Valorem Taxes and the Fiscal Gap in Federations
This paper investigates the implications of vertical fiscal externalities for the optimal federal tax and the sign of fiscal gap in the presence of ad valorem taxation. It is shown that the federal government can always achieve the second-best optimum for public good provision. The sign of the fiscal gap is, in general, ambiguous. The consequence of this is that a precise evaluation of the fiscal gap requires an explicit consideration of the underlying fundamentals of the federal economy.
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- Robin Boadway & Michael Keen, 1996.
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- Robin Boadway & Michael Keen, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
- 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. Full references (including those not matched with items on IDEAS)