Tax Assignment Research Articles

Vertical Tax Externalities in the Theory of Fiscal Federalism

Vertical tax externalities between levels of government can occur in federal structures, with responses to the tax policies of one level of government affecting the tax base of the other. Such effects mostly arise when federal and state governments co-occupy the same tax base. This paper examines these externalities by considering their implications for a range of issues in fiscal federalism: the relationship between state and federal tax rates, the equilibrium levels of these taxes, the relevance of experience in federal countries for policy design in international settings, intergovernmental grants, and the assignment of tax powers among levels of government.

The Taxation of Natural Resources and the Future of the Russian Federation

This paper is an examination of the vertical and horizontal division of revenues from taxing natural resources, a crucial issue for the future of the Russian Federation. Assigning resource revenues entirely to subnational governments would undermine the fiscal capacity of the central government, Resources arc so concentrated geographically that allocating revenues primarily to jurisdictions where production occurs would create large fiscal disparities among subnational governments. Either of these policies could encourage the disintegration of the Federation—as could a contrary policy.After a brief review of the concept of economic rent, the theory of tax assignment is examined and applied to taxes on natural resources. Whereas economic arguments tend to favor centralization of resource rents, political realities suggest decentralization. It is noted that there will be many claimants to potential rents from Russian natural resources, including consumers, native peoples, suppliers of oilfield equipment, pipeline companies, foreign investors, and managers and employees in the energy sector and its suppliers. Last, consideration is given to whether resource rents should be placed in trust funds, by either native peoples or the government of producing regions, and the experience of Alberta and Alaska in this area is reviewed.

Integrating Land-Value Taxation with the Internalization of Spatial Externalities

This paper describes procedures that might be used to combine collection of the full rental value of land for public purposes with assignment of appropriate taxes and subsidies for activities with spatial externalities. The paper begins with a discussion of reasons for pursuing these goals and the conditions that would obtain if they were satisfied. Next, procedures for collecting the full rental value of land for public purposes, and for internalizing spatial externalities, are described. The proposed procedures for internalizing spatial externalities are then compared with zoning. The following sections discuss the connections between the two sets of proposed procedures and the implications of the proposals for government structure. The paper closes with a brief summary.

CAPITALIZATION AND THE THEORY OF LOCAL PUBLIC FINANCE: AN INTERPRETIVE ESSAY

Abstract. The Tiebout hypothesis that consumer mobility and interjurisdictional competition leads to efficient provision of local services has provoked much controversy and debate in recent years. This article summarizes the opposing and conflicting viewpoints on this subject and presents a synthesis of the theoretical and empirical literature. The basic conclusion of this literature is that only under very restrictive assumptions will foot‐voting and interjurisdictional competition ensure allocative efficiency in the local public sector. Nevertheless, the Tiebout mechanism offers important insights for public policy debates on the assignment of taxes and services and the design of equalization grants. Oates' suggestion that capitalization of fiscal differentials into residential property values provides an empirical test of the Tiebout hypothesis also generated an intense debate on the theoretical validity of this procedure and a heightened interest in its empirical applications. This debate is evaluated and an overview is given of the leading empirical approaches to test the efficiency and equity implications of the Tiebout mechanism. Controversial empirical issues such as the choice of the tax price term, the level of aggregation and econometric estimation problems are highlighted in this part of the survey.

Tax Assignment in Multilevel Systems of Government: A Political-Economic Approach and the Case of Spain

In this paper the question of tax assignment in multiple-level systems of government is addressed. Existing economic theory of fiscal federalism, which is the main source of information on tax assignment, is reviewed and various criticisms of this theory, as a normative theory, are outlined which indicate major difficulties in application to practice. Where a strong desire for decentralisation exists, such as in Spain, an alternative political-economic approach is suggested. This is then used to comment on developments in Spain where, it is concluded, the present assignment of taxing powers is insufficient to guarantee the autonomy of the regional governments. For Spain, regional access to a share of the VAT or personal income tax is suggested as the best option for tax reform in order to offer sufficient regional tax autonomy.

Tax Assignment in Federal Countries

Tax Assignment in Federal Countries

Property taxation and equity: An interstate analysis

The empirical findings discussed here tend to substantiate the original preise that variation in tax burden across states is too significant to be “hidden” in aggregate analysis. The evidence shows that states do not, in fact, possess the same incidence pattern as some aggregate measures might suggest. It has been found instead that due to differences in local tax assignment and the tax instruments used, incidence patterns vary widely. It was also found that the property tax exerts a significant regressive influence in every state.

PUBLIC FINANCE AND REGIONAL ACCOUNTS*

This paper discusses the problems that arise in the regional allocation of public sector accounts. These problems arise mainly in connection with the regional allocation of government expenditures on a governing rather than a procurement basis, and in the derivation of a meaningful surplus or deficit. The latter in turn requires an examination of the real geographic incidence of government revenues—to avoid, for instance, the assignment of the whole tobacco tax to Virginia and North Carolina. The use of a procurement basis for government product and the real geographic distribution of direct tax incidence for government revenue would produce a more complete and meaningful regional surplus or deficit measure, and gross regional products will not be as subject to spurious inter‐regional variation.

The Economics of Earmarked Taxes

The Economics of Earmarked Taxes