A Tax Competition Analysis of Congestible Public Inputs

This paper investigates the provision of congestible local public inputs within a tax competition framework. Public input provision is financed by a business capital tax and by a profits tax on firms as a congestion tax. With this tax system, local tax and expenditure policies are inefficient becaus...

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Bibliographic Details
Published in:Journal of urban economics 2000-09, Vol.48 (2), p.242-259
Main Author: Matsumoto, Mutsumi
Format: Article
Language:English
Subjects:
Congestion
Externalities
Local goods
Local government
Public goods
public inputs
Tax competition
Urban economics
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Summary:This paper investigates the provision of congestible local public inputs within a tax competition framework. Public input provision is financed by a business capital tax and by a profits tax on firms as a congestion tax. With this tax system, local tax and expenditure policies are inefficient because of potential capital outflows. The tax mix is inefficient in that the profits tax rate is too high relative to the capital tax rate. The level of public input provision is inefficiently low. Focusing on expenditure inefficiency, this analysis of public inputs is compared with Wilson's analysis (Journal of Urban Economics, 1995, 38, 333–356) of congestible public goods.
ISSN:0094-1190
1095-9068
DOI:10.1006/juec.1999.2165