Ad valorem taxation, equalisation and commuting in a federation: Horizontal and vertical tax externalities revisited

Konferenzbeitrag

In this paper, commuting is introduced to a federal economy where benevolent lower-level (state) governments levy an ad valorem tax on labour income. This results in inefficiently low levels of taxation, even when households as a whole do not migrate. Indeed, rather than attracting more workers by lowering taxes, states are out to boost labour supplied by own residents and impede work incentives of non-residents. When the tax base is co-occupied by the federal and state governments secondly, either under- or overtaxation occurs. We find that when taxation is levied ad valorem, undertaxation is more liable to occur than under unit taxation. For the same underlying reasons lastly, fiscal equalisation is expected to give less cause for overtaxation as commonly assumed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: 55th Congress of the European Regional Science Association: "World Renaissance: Changing roles for people and places", 25-28 August 2015, Lisbon, Portugal

Classification and Topics

• Classification: Wirtschaft ; State and Local Taxation, Subsidies, and Revenue
• Subject: Commuting ; fiscal federalism ; tax externalities ; tax competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sas, Willem
• Event: Veröffentlichung
• (who): European Regional Science Association (ERSA)
• (where): Louvain-la-Neuve
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/124684
• Last update: 10.03.2025, 11:44 AM CET