Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation

Andreas Haufler and Christoph Lülfesmann

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: We analyze the effects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, central tax rate in the first stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism effectively reduces competition for mobile capital between the members of the union. Even without side payments, the gains from partial coordination are distributed across the heterogeneous members in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. Finally, we show that a dual structure of capital taxation has advantages even in a setting where costly side payments are feasible.

JEL-codes: H25 H77 H87 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-pbe
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Related works:
Journal Article: Reforming an asymmetric union: On the virtues of dual tier capital taxation (2015)
Working Paper: Reforming an asymmetric union: on the virtues of dual tier capital taxation (2013)
Working Paper: Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation (2013)
Working Paper: Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation (2013)
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