Tax competition, excludable public goods, and user charges
This paper provides an explanation for the increasing reliance on revenue from user charges on excludable public goods. We develop a model with many identical countries. The government of each country imposes a source-based tax on capital and supplies an excludable public good to heterogeneous households. Without tax competition, the price on the public good is zero. Tax competition induces each country to choose a positive price. The reliance on user charges turns out to be increasing in the intensity of tax competition measured by the number of countries. A coordinated decrease in user charges is shown to raise welfare in all countries.
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|Date of creation:||2009|
|Date of revision:|
|Publication status:||Published in International Tax and Public Finance 3 16(2009): pp. 321-336|
|Contact details of provider:|| Postal: Ludwigstr. 28, 80539 Munich, Germany|
Web page: http://www.vwl.uni-muenchen.de
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Munich Reprints in Economics
19389, University of Munich, Department of Economics.
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