Tax Competition Reconsidered
In a classic model of tax competition, we show that the level of public good provision and taxation in a decentralized equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other.
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Eden, Benjamin (Vanderbilt University, 2009)The paper assumes a government advantage in collecting income contingent payments and develop a proposal for a government loan program that is an integral part of the tax system. The focus is on administrative costs and ...
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