Does tax competition tame the Leviathan?

• 成果类型: Article
• 署名作者: Brulhart, Marius; Jametti, Mario
• 署名单位: University of Lausanne; Centre for Economic Policy Research - UK; Universita della Svizzera Italiana; Leibniz Association; Ifo Institut
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2019.06.005
• 发表日期: 2019
• 关键词: Tax competition; optimal taxation; Government preferences; Fiscal federalism; Direct democracy

摘要

We study the impact of tax competition on equilibrium taxes and welfare, focusing on the jurisdictional fragmentation of federations. In a representative-agent model of fiscal federalism, fragmentation among jurisdictions with benevolent tax-setting authorities unambiguously reduces welfare. If, however, tax-setting authorities pursue revenue maximization, fragmentation, by pushing down equilibrium tax rates, may under certain conditions increase citizen welfare. We exploit the highly decentralized and heterogeneous Swiss fiscal system as a laboratory for the estimation of these effects. While for purely direct democratic jurisdictions (which we associate with relatively benevolent tax setting) we find that tax rates increase in fragmentation, fragmentation has a moderating effect on the tax rates of jurisdictions with some degree of delegated government. Our results thereby support the view that tax competition can be second-best welfare improving by constraining the scope for public-sector revenue maximization. (C) 2019 Elsevier B.V. All rights reserved.