The allocation of the income tax among different levels of government: a theoretical solution

Ferruccio Ponzano ()

POLIS Working Papers from Institute of Public Policy and Public Choice - POLIS

Abstract: The purpose of this paper is to show how two competitive governments can simultaneously choose their income taxes. There are two different levels of government in competition: a central government and a local one. The problem is analysed starting from the Leviathan hypothesis and from the theory of incomplete contracts. We assume that a government includes its re-election in its utility function and study the allocation of the income tax rates between the two levels of government, free from any legal or regulatory constraint. We show that the governments are interested in meeting the re-election constraint, but this common interest does not generate an egalitarian allocation of the tax rates.

JEL-codes: D72 H11 H21 H71 H77 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:uca:ucapdv:40

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