IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Tax Competition and Tax Coordination in an Optimum Income Tax Model

Listed author(s):
  • Bernd Huber
Registered author(s):

    The paper uses the self-selection approach of Stiglitz (1982) to study tax competition and tax coordination in a many country-optimum income tax model. In the model, the government can impose a non-linear tax schedule on wage income and a (source-based) tax on mobile capital. In an uncoordinated equilibrium, it turns out that countries can use the capital tax instrument to weaken the self-selection constraint. The paper presents examples where positive and negative capital taxes are optimal from a single country perspective. For the case of CES production functions, the paper shows that the optimal capital tax is zero. - The paper also shows that, contrary to the standard tax competition model, the uncoordinated equilibrium can be efficient. If the wealth distribution (the endowments with capital among individuals), is egalitarian, a coordination of capital taxes does not affect welfare. For non-egalitarian wealth distributions, a coordinated increase in capital taxes can raise or lower welfare depending on the redistributive impact of a higher capital tax.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 97-25.

    in new window

    Date of creation:
    Handle: RePEc:kud:epruwp:97-25
    Contact details of provider: Postal:
    Ă˜ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark

    Phone: (+45) 3532 4411
    Fax: +45 35 32 30 00
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:kud:epruwp:97-25. 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: (Thomas Hoffmann)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.