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Sub-metropolitan tax competition with household and capital mobility

Tidiane Ly ()

International Tax and Public Finance, 2018, vol. 25, issue 5, 1129-1169

Abstract: Abstract This paper investigates the efficiency properties of tax competition between sub-metropolitan jurisdictions when capital, residents and workers are mobile, and both households and firms compete for local land markets. We analyze two decentralized equilibria: (1) With a local tax on residents and two separate local taxes on capital and land inputs, efficiency is achieved and the existence of a marginal fiscal cost due to residents’ mobility is revealed; (2) Combination of the taxes on capital and land inputs into a single business property tax leads local authorities to charge inefficiently high taxation on capital. We show that capital mobility induces a reduction in the business land taxation and local public inputs are used to offset the distorting effects of the property tax, accounting for the distorting impact of workers’ mobility.

Keywords: Tax competition; Public goods; Public inputs; Household mobility; Capital mobility (search for similar items in EconPapers)
JEL-codes: H71 H72 R50 R51 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Sub-metropolitan Tax Competition with Household and Capital Mobility (2016) Downloads
Working Paper: Sub-metropolitan Tax Competition with Household and Capital Mobility (2016) Downloads
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