Vertical income tax externalities and fiscal interdependence: evidence from the US

Alejandro Esteller-Moré () and Albert Solé-Ollé

No 99-28, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Concurrent taxation is a feature of many federal systems. As a consequence of this fact, the tax policy of one level of government affects the tax base of the other. This paper carries out a theoretical analysis of the interdependent tax-setting decisions of federal and regional governments, paying special attention to institutional features that characterise the U.S. federal system in practice and that formally link the taxes employed at various levels of government (i.e.: tax deductibility). The developed hypotheses are tested with data corresponding to the U.S. personal income taxes for the last decade. We find that when the federal government increases taxes, there is a significant positive response of regional taxes.

JEL-codes: H21 H3 H77 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (4)

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Journal Article: Vertical income tax externalities and fiscal interdependence: evidence from the US (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:5243

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