Does Federalism Lead to Excessively High Taxes?

The relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital, the extent to which immobile factors are taxed by the states, and the strength of preferences between federal and state expendi...

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Bibliographic Details
Published in:The American economic review 2002-03, Vol.92 (1), p.363-370
Main Authors: Keen, Michael J., Kotsogiannis, Christos
Format: Article
Language:English
Subjects:
Corporate taxes
Economic externalities
Economic theory
Elasticity
Equilibrium
Expenditures
Externalities
Federal government
Federal taxes
Federalism
Fiscal policy
Fiscal years
Government
Income tax
Income taxes
Optimal taxation
Property taxes
Shorter Papers
State income tax
State taxes
Studies
Tax base
Tax increases
Tax rates
Taxation
Taxes
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Summary:The relative strengths of vertical and horizontal tax externalities turn on the balance between the interest responsiveness of the supply of savings and demand for capital, the extent to which immobile factors are taxed by the states, and the strength of preferences between federal and state expenditures. The vertical externality will dominate if the aggregate tax base of the federation is responsible to the state tax instrument. Tax interactions in federations are more complex than has often been supposed.
ISSN:0002-8282
1944-7981
DOI:10.1257/000282802760015784