 Tax competition and tax coordination in a median voter modelClemens Fuest and Bernd Huber Munich Reprints in Economics from University of Munich, Department of Economics Abstract: This paper analyzes the welfare effects of capital tax coordination in a simple model of fiscal competition where fiscal policy is subject to majority voting and households differ with respect to their labor and capital income. It turns out that a coordinated capital tax increase may raise or reduce welfare, depending on the relative magnitude of i) economic distortions induced by a labor tax and ii) political distortions resulting from the influence of the median voter on fiscal policy decisions. A negative welfare effect is more likely, the smaller the marginal excess burden of the labor tax and the smaller the ratio of the median voter’s labor income to average labor income. We also use empirical estimates of the marginal excess burden of taxation to determine the welfare effects of tax coordination; it turns out that a negative welfare effect of coordinated tax increases may emerge in our model for empirically reasonable parameters. Date: 2001 Published in Public Choice 1-2 107(2001): pp. 97-113 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20292 Access Statistics for this paper More papers in Munich Reprints in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.