scholarly journals Tax competition and tax base equalization in the presence of multiple tax instruments

2021 ◽  
Author(s):  
Mutsumi Matsumoto
Keyword(s):  
Tax Competition ◽  
Primary Objective ◽  
Fiscal Equalization ◽  
Tax Base ◽  
Single Tax ◽  
Fiscal Externalities ◽  
Labor Tax ◽  
Mobile Capital ◽  
Capital Tax ◽  
Regional Capital

AbstractThe literature on tax competition has argued that tax base equalization, which reduces regional disparities in tax bases, can serve as a means of internalizing horizontal and vertical fiscal externalities. This argument assumes that each government relies on a single tax base (a regional tax on mobile capital and a federal tax on savings). This paper considers the case in which a distortionary labor tax is also available. Internalizing fiscal externalities requires that while the regional capital tax base is fully equalized, a region’s equalization entitlement for the labor tax is positive when its tax base is “larger” than the average tax base of all regions. This efficient tax base equalization system is incompatible with the primary objective of fiscal equalization.

Fiscal Externalities In The Globally Integrated Market

2011 ◽  
Vol 23 (1) ◽  
Author(s):  
Akinori Tomohara
Keyword(s):  
Tax Competition ◽  
Multinational Companies ◽  
Font Size ◽  
Pareto Improvement ◽  
Production Decisions ◽  
Fiscal Externalities ◽  
Mobile Capital

<p class="MsoBodyText" style="text-justify: inter-ideograph; text-align: justify; line-height: normal; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">While tax competition of mobile capital has been explored in the literature, little attention has been paid to the effects on business incentives for global trading.<span style="mso-spacerun: yes;">&nbsp; </span>We show that tax competition creates negative fiscal externalities via distorted production decisions of multinational companies, when the markets across countries are interrelated through intra-firm trade.<span style="mso-spacerun: yes;">&nbsp; </span>Pareto improvement may emerge once the governance of the interrelated markets is coordinated across different governments. </span></span></p>

An analysis of US greenhouse gas cap-and-trade proposals using a forward-looking economic model

2011 ◽  
Vol 16 (2) ◽  
pp. 155-176 ◽  
Author(s):  
ANGELO COSTA GURGEL ◽  
SERGEY PALTSEV ◽  
JOHN REILLY ◽  
GILBERT METCALF
Keyword(s):  
Greenhouse Gas ◽  
Ghg Emissions ◽  
Substantial Effect ◽  
Welfare Cost ◽  
Economic Implications ◽  
Early Action ◽  
Labor Tax ◽  
Long Term Effect ◽  
Capital Tax ◽  
Forward Looking

ABSTRACTWe develop a forward-looking version of the recursive dynamic MIT Emissions Prediction and Policy Analysis (EPPA) model, and apply it to examine the economic implications of proposals in the US Congress to limit greenhouse gas (GHG) emissions. We find that shocks in the consumption path are smoothed out in the forward-looking model and that the lifetime welfare cost of GHG policy is lower than in the recursive model, since the forward-looking model can fully optimize over time. The forward-looking model allows us to explore issues for which it is uniquely well suited, including revenue-recycling and early action crediting. We find capital tax recycling to be more welfare-cost reducing than labor tax recycling because of its long-term effect on economic growth. Also, there are substantial incentives for early action credits; however, when spread over the full horizon of the policy they do not have a substantial effect on lifetime welfare costs.

Do State Sales Taxes Crowd Out Local Option Sales Taxes?

2018 ◽  
Vol 18 (3) ◽  
Author(s):  
Gregory S. Burge ◽  
Cynthia L. Rogers
Keyword(s):  
Local Governments ◽  
Sales Tax ◽  
Tax Rates ◽  
Tax Base ◽  
Tax Rate ◽  
Sales Taxes ◽  
Fiscal Externalities ◽  
Crowd Out ◽  
State And Local ◽  
Fiscal Spillovers

Abstract Currently, sales taxes are imposed at both the state and local levels in 37 US states. In these environments, vertical tax competition occurs as governments share a common sales tax base, and local jurisdictions have autonomy over sales tax rates. As cash-strapped states look to sales taxes for additional revenues, local governments may worry about potentially adverse revenue impacts, as consumers react to combined tax rate increases. This study examines state-municipal and county-municipal fiscal spillovers using an empirical approach that accounts for endogenous tax policy leadership and voter tax fatigue. Employing comprehensive longitudinal data from Oklahoma, we find that state tax hikes significantly crowd out future rate increases for the large group of jurisdictions that are designated as followers. Leader jurisdictions are not found to display crowd-out tendencies, a result that is consistent with recent work suggesting that leaders may be less influenced by vertical fiscal externalities than other jurisdictions.

scholarly journals An evaluation of the revenue side as a source of fiscal consolidation in high debt economies

2014 ◽  
Vol 41 (6) ◽  
pp. 771-788
Author(s):  
Ritwik Banerjee
Keyword(s):  
General Equilibrium ◽  
Tax Rates ◽  
Consumption Tax ◽  
Policy Makers ◽  
Revenue Generation ◽  
Content Type ◽  
Tax Rate ◽  
Labor Tax ◽  
Capital Tax ◽  
European Economies

Purpose – Unsustainable levels of debt in some European economies are causing enormous strain in the Euro area. Successful debt consolidation in high-debt economies is the single most important objective for the European policy makers. The paper aims to discuss these issues. Design/methodology/approach – The author uses a dynamic general equilibrium closed economy model to compute the dynamic Laffer curves for Portugal, Ireland, Greece and Spain for different class of taxes. The general equilibrium effects of the interaction of labor tax, consumption tax and capital tax is demonstrated. Findings – Location of each economy on its Laffer curve suggests that there exists a scope for considerable revenue generation by raising consumption and labor tax rates but no such possibilities exist for capital tax rate. Thus revenue generation with certain tax rates as instruments, holds key to successful and sustained debt reduction. Originality/value – This to the best of knowledge is one of the first papers which looks closely at the tax revenue – tax rate panel for the major deeply indebted European economies.

Vertical Fiscal Externalities and Federal Tax-Transfers under Variable Factor Supplies

2019 ◽  
Author(s):  
Nikos Tsakiris ◽  
Panos Hatzipanayotou ◽  
Michael S Michael
Keyword(s):  
Federal Government ◽  
State Governments ◽  
International Mobility ◽  
Jel Codes ◽  
Fiscal Externalities ◽  
Public Consumption ◽  
Variable Factor ◽  
Capital Tax ◽  
Labor Taxes ◽  
Endogenous Labor

Abstract Within a model of variable supply of capital due to international mobility and variable labor supply due to endogenous labor-leisure choice, we revisit the issues of vertical fiscal externalities, and of federal tax-transfers. Capital and labor taxes by federal and state governments finance the provision of federal and of state public consumption goods. When capital and labor are substitutes in production, we show that (i) the state’s optimal policy calls for capital and labor taxes, (ii) the vertical fiscal externality can be reversed from negative, implying inefficiently high noncooperative capital taxes, to positive, implying inefficiently low noncooperative capital taxes, and (iii) under centralized leadership the federal government replicates the second best optimum with a capital tax, and possibly, top-down transfers. (JEL codes: F18, F21, H21).

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