An Estimable Model of Income Redistribution in a Federation: Musgrave Meets Oates

• 成果类型: Article
• 署名作者: Milligan, Kevin; Smart, Michael
• 署名单位: University of British Columbia; University of Toronto
• 刊物名称: AMERICAN ECONOMIC JOURNAL-ECONOMIC POLICY
• ISSN/ISSBN: 1945-7731
• DOI: 10.1257/pol.20160600
• 发表日期: 2019
• 页码: 406-434
• 关键词: top earners evidence; marginal tax rates; taxable income; millionaire migration; deadweight loss; state taxes; taxation; elasticity; externalities; COMPETITION

摘要

We develop a theory of cross-border income shifting in response to subnational personal taxation in a federation and examine its implications for the excess burden of personal taxes. We show how a properly chosen federal tax rate can offset the fiscal externality between states and facilitate decentralization, even in a heterogeneous federation where unitary taxation is suboptimal. Optimal taxes depend on the elasticities of national tax avoidance and of cross-state tax base shifting). We estimate these elasticities around a tax decentralization reform in Canada, finding both to he empirically relevant. We discuss the implications for optimal federalism. (JEL D31, H21, H23, H24, H26, H71, H77)