The Tax Gradient: Spatial Aspects of Fiscal Competition

Arbeitspapier

State borders create a discontinuous tax treatment of retail sales. In a Nash game, local tax rates will be higher on the low-state-tax side of a border. Local taxes will decrease from the nearest high-tax border and increase from the low-tax border. Using driving time from state borders and all local sales tax rates, local tax rates on the low-tax side of the border are 1.25 percentage points higher, reducing the differential in state tax rates by over three-quarters. A ten minute increase in driving time from the nearest high-tax state lowers a border town’s local tax rate by 6%.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 5292

Classification and Topics

• Classification: Wirtschaft ; Taxation, Subsidies, and Revenue: General ; Business Taxes and Subsidies including sales and value-added (VAT) ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects ; Intergovernmental Relations; Federalism; Secession ; Finance in Urban and Rural Economies
• Subject: sales taxes ; cross-border shopping ; tax competition ; fiscal federalism

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Agrawal, David R.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/110781
• Last update: 10.03.2025, 11:45 AM CET