The Fiscal Incentive Effects of the Australian Equalisation System

Bev Dahlby and Neil Warren
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Bev Dahlby and Neil Warren: Department of Economics, University of Alberta, Canada; ATAX, University of New South Wales
Authors registered in the RePEc Author Service: Bev Dahlby ()

Taxation from ATAX, University of New South Wales

Abstract: Equalisation grants can affect a state's fiscal behaviour because its tax policies can affect the size of its grant. For a large state, an increase in its tax rate will increase the standard tax rate used to calculate the grant for that base and thereby reduce (increase) the state's grant if it has a high (low) relative fiscal capacity with respect to that base. In addition, a state's grant will increase if its relative fiscal capacity declines when it raises an additional tax revenue. Our econometric results indicate that the equalisation system may have affected the Australian state's choice of tax rates

Keywords: fiscal federalism; federal grants; equalisation; marginal cost of funds; taxation (search for similar items in EconPapers)
JEL-codes: H2 H21 H23 H71 H73 H77 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2002-09-01
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Journal Article: Fiscal Incentive Effects of the Australian Equalisation System (2003)
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