Is There a Connection Between Reciprocity and Tax Competition?

Jonathan Rork and Gary A. Wagner

Public Finance Review, 2012, vol. 40, issue 1, 86-115

Abstract: One challenge states face in designing income tax systems is deciding how to treat nonresident earners. Numerous states have entered into reciprocity agreements with other states that exclude nonresidents’ income from the tax base. These agreements provide a unique opportunity to explore the nature of state tax competition. The authors demonstrate that not only do reciprocity agreements allow states to have higher income tax rates than do nonreciprocity states but also that the states with reciprocity agreements exhibit increased levels of competition over other taxes.

Keywords: spatial econometrics; interjurisdictional competition; state taxation; reciprocity (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:40:y:2012:i:1:p:86-115

DOI: 10.1177/1091142111419486

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