Majority choice of taxation and redistribution in a federation

Stephen Calabrese, Dennis Epple and Richard Romano

Journal of Public Economics, 2023, vol. 217, issue C

Abstract: To study redistribution and taxation in a federation, we provide a model with a central government and multiple local governments, the former with power to levy an income tax for redistribution, and the latter choosing a local income tax, property tax, lump-sum tax or subsidy, and a local public good. Policy is set by majority choice at each tier of government by households that differ by income and by ability to move among local jurisdictions. We provide sufficient conditions for existence of equilibrium and examine its properties. Central findings are federal income distribution, little local redistribution, and local preference for property taxation over income taxation to fund local public goods.

Date: 2023
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Working Paper: Majority Choice of Taxation and Redistribution in a Federation (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:217:y:2023:i:c:s0047272722001840

DOI: 10.1016/j.jpubeco.2022.104782

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