Vertical versus horizontal tax externalities:: An empirical test

• 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; York University - Canada
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2006.04.004
• 发表日期: 2006
• 页码: 2027-2062
• 关键词: Tax competition; horizontal externalities; vertical externalities; Fiscal federalism; swiss tax system

摘要

We study taxation externalities in federations of benevolent governments. Where different hierarchical government levels tax the same base, one can observe two types of externalities: a horizontal externality, working among governments of the same level and leading to tax rates that are too low compared to the social optimum; and a vertical externality, working between different levels of government and leading to suboptimally high tax rates. Building on the model of Keen and Kotsogiannis [Keen, Michael J., Kotsogiannis, Christos, 2002. Does federalism lead to excessively high taxes? American Economic Review 92 (1) 363-370], we derive a discriminating hypothesis to distinguish vertical and horizontal tax externalities based on measurable variables. This test is applied to a panel data set on local taxes in a sample of Swiss municipalities that feature direct-democratic fiscal decision making, so as to maximize the correspondence with the benevolent governments of the theory. We find that vertical externalities dominate - they are thus an observed empirical phenomenon as well as a notable extension to the theory of tax competition. (c) 2006 Elsevier B.V. All rights reserved.