re examination of uniform commodity taxes under a non linear income tax system and its implication for production efficiency abstract this paper shows that the result of uniform commodity tax under nonlinear income taxation by atkinson and stiglitz 1976 no longer holds if the production side of an economy is taken into the consideration in particular imposing a non uniform commodity tax can pareto improve welfare even under nonlinear income taxation in addition the paper shows that if the government uses a nonlinear income tax system for income redistribution then the introduction of distortions in the public sector can pareto improve welfare contrary to the results in diamond and mirrlees 1971

institutional competition versus centralization quo vadis europe lots of steep and sometimes blind bends with harsh speed limits and frequent detours but still it has been one that has attracted more and more traffic after a successful period of shaping a customs union and a free trade area following the treaty of rome 1957 europe became infected with euro sclerosis in the seventies owing to an increased intensity of national regulation especially in the labour market the constructionist approach to harmonization from above slowed down the speed of integration almost to a halt only the change of two fundamental rules revitalized the european integration process namely the introduction of majority voting in the ec council and the mutual recognition of national regulations brought about by the 1979 ruling of the european court with the single european act and the launch of the internal market programme europhoria blossomed finally leading to the maastricht treaty which aimed to be the masterpiece of european integration only very recently the danish no and the unconvincing approval by the french voters cooled off hopes for a united states of europe signalling that european integration is at the crossroads once again

racial earnings disparities and family structure one explanation for the widening of racial earnings gaps among family heads during the 1980s is that black families were increasingly headed by females during that period this explanation is tested using data on black and white family heads in 1976 and 1985 from the institute for research on poverty s current population survey log earnings equations corrected for selection bias and for the endogeneity of labor force participation are estimated for blacks and whites in 1976 and 1985 if the impact of rising female family headship on labor force participation is ignored one finds support for the family structure explanation but support for alternative explanations is also found there are substantial impacts of within race gender discrimination and of market racial discrimination when the endogeneity of family structure is taken into account further support is found for the view that endowment differences only explain a modest portion of the rising gap in earnings between black and white family heads

international effects of tax reforms in an open economy with international capital flows there is an equivalence relation between income tax consumption tax international borrowing tax and an external interest earning tax this paper analyzes tax reform involving shifts between income and consumption taxes in this setting it is shown that the real effects of such revenue neutral tax reform depend critically on the country s current account position and the nature of the reform in particular whether the world interest rate rises or falls as a consequence of a budget deficit depends on the tax system in force the analysis provides a clear rationale for the international coordination of tax policies copyright 1989 by royal economic society

can state taxes redistribute income abstract the evidence presented in this paper supports the basic theoretical presumption that state and local governments cannot redistribute income since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions a relatively unfavorable tax will cause gross wages to adjust until the resulting net wage is equal to that available elsewhere the current empirical findings go beyond confirming this long run tendency and show that gross wages adjust rapidly to the changing tax environment thus states cannot redistribute income for a period of even a few years the adjustment of gross wages to tax rates implies that a more progressive tax system raises the cost to firms of hiring more highly skilled employees and reduces the cost of lower skilled labor a more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees since state taxes cannot alter net wages there can be no trade off at the state level between distribution goals and economic efficiency shifts in state tax progressivity by altering the structure of employment in the state and distorting the mix of labor inputs used by firms in the state create deadweight efficiency losses without achieving any net redistribution

measuring the deadweight loss from taxation in a small open economy a general method with an application to sweden the paper develops a simple general equilibrium framework for calculating the marginal deadweight loss from taxation in a small open economy the framework allows a decomposition of the deadweight loss from each tax instrument into the losses stemming from the contraction of the different tax bases the paper describes a method of calibrating the model which exploits the links between the various factor supply elasticities implied by the standard life cycle model it also develops a method of estimating effective tax rates that is consistent with optimising household and firm behaviour to illustrate how the model works it is calibrated to a data set for sweden the quantitative results highlight the importance of accounting for the interaction between the major tax bases when estimating deadweight loss

an analysis of the corporate income tax policy of less developed countries unlike developed countries corporate tax rather than personal tax revenues are the greater source of public finance for less developed countries ldcs this paper analyses the corporate income tax policy for a large panel of ldcs over the period 1980 2006 the analysis shows that although the corporate tax rate has been decreasing in ldcs corporate tax revenues have been increasing as a percentage of total tax revenues and gdp contrary to standard tax competition theory there is also strong evidence that corporate income taxes in ldcs are increasing in the country s openness as measured by capital mobility the analysis also shows that the corporate tax rate is increasing in the personal tax rate as income shifting theory predicts however this has not translated into increased corporate tax revenues of equal interest is the lack of evidence of a relationship between the ldc s government revenue needs and its corporate tax rate

the new political economy of taxation in advanced capitalist democracies earlier versions of this paper were presented at the 1999 annual meeting of the american political science association september 1 5 atlanta ga and the 2000 annual meeting of the midwest political science association april 27 30 chicago il the authors thank steffen ganghof philip genschel mark hallerberg alex hicks william keech dennis quinn and the anonymous reviewers and editor of this journal for many helpful comments and dennis quinn for generously sharing data duane swank thanks the german marshal fund of the united states and marquette university for support of work incorporated in this paper data utilized in this paper are available from duane swank marquette edu

the dominance of inefficiencies over scale and product mix economies in banking abstract this study measures and analyzes inefficiencies for all u s banks in 1984 inefficiencies are measured relative to a thick frontier cost function and are found to dominate measured scale and product mix economies most inefficiencies are operational in nature involving the overuse of physical inputs rather than financial involving overpayment of interest also technical inefficiencies proportionate overuse of all inputs dominate allocative inefficiencies improper mix of inputs these results suggest that competitive pressures in banking from deregulation will be focused primarily on banks that do not control costs rather than on those of a particular size or product mix

capital taxation and production efficiency in an open economy we attempt to clarify the role of the production efficiency theorem in international capital taxation it is shown that a direct open economy analogue to the production efficiency theorem arises not in the small country case but in the more general setting of tax competition between a finite number of identical jurisdictions

corporate tax policy under the labour government 1997 2010 this paper reviews and evaluates corporate tax policy under the 1997 2010 labour government during this period the government implemented a classical rate cut cum base broadening tax policy for large companies tax policy for small and medium sized enterprises smes is more difficult to characterize in the first two terms rates were cut more frequently than for large businesses and the base was narrowed but in the government s third term statutory rates for smes were increased extensive reforms of dividends and capital gains tax at the individual and corporate level have also been implemented in 1998 the imputation system was abolished and in 2009 foreign dividends became exempt for corporate income tax purposes a comparison of the statutory and effective rates shows that the uk has lost some ground to the oecd since 2003 4 fundamental reforms of dividends and capital gains taxation have aligned the uk to its competitors and to eu law we find that the overall effect of the labour s tax policy on aggregate investment may have been small for three reasons increases in real investment between 1997 and 2007 are largely explained by the economic cycle while the reduction in the tax component of the user cost of capital was small moreover the increase in aggregate investment was led by an exceptional surge in investment in structures driven by a real estate boom finally we note that most investment was undertaken by large companies and therefore it was not affected by the large set of tax reforms focusing on smes

income convergence within an economic union the role of factor mobility and coordination abstract in the context of a human capital based growth model we show the essential role of labor mobility in equalizing income levels for countries that start off from different initial income positions human capital externalities cum labor mobility are the driving forces behind the income level equalization process in a non cooperative equilibrium labor mobility will be limited and income level equality will not be achieved coordination will allow free mobility of labor within an economic union leading to income convergence coordination of educational policies will also help internalize the inter regional human capital externalities to ensure efficient growth for members of the union

taxes institutions and foreign diversification opportunities abstract investors can access foreign diversification opportunities through either foreign portfolio investment fpi or foreign direct investment fdi the worldwide tax regime employed by the us potentially distorts this choice by penalizing fdi relative to fpi in low tax countries on the other hand weak investor protections in foreign countries may increase the value of control creating an incentive to use fdi rather than fpi by combining data on us outbound fpi and fdi this paper analyzes whether the composition of us outbound capital flows reflects these incentives to bypass home and host country institutional regimes the results suggest that the residual tax on us multinational firms foreign earnings skews the composition of outbound capital flows a 10 decrease in a foreign country s corporate tax rate increases us investors equity fpi holdings by approximately 10 controlling for effects on fdi investor protections also seem to shape portfolio choices though these results are not robust when only within country variation is employed

simple rules for the optimal taxation of international capital income in this paper we reconcile and extend previous results on the collectively optimal taxation of international investment income the weighted average rule of horst 1980 for example is shown to rest on unattractive assumptions on the set of instruments available ruling out any need for distorting taxes the principal contribution is to establish a new and strikingly simple weighted average rule encompassing the other key result in this area for the general case in which lump sum taxes are unavailable the ability to tax pure profits is perhaps restricted and distorting taxes on both domestic and border crossing capital income are optimally deployed

international competition in corporate taxation evidence from the oecd time series despite numerous studies controversy remains about the impact of economic globalization on corporate taxation theoretical models of tax competition generate different predictions about trends in the level of tax burdens and the degree of convergence in tax burdens across countries in this paper we present a purely empirical analysis of the evolution of tax burdens across oecd countries since the 1950s issues of measurement and methodology have contributed to the inconclusive character of studies to date so we begin with an assessment of alternative measures of the burden problems with some commonly used measures of the tax burden are considered and the most plausible measures identified descriptive analysis of these time series reveals no evidence of a competitive race to the bottom in corporate taxation and little evidence of even a harmonization of the tax burden many inferential studies of corporate taxation base their conclusions on cross sectional analysis in contrast we adopt an explicitly time series method to what are essentially time series questions cointegration methodology originally developed to study issues of convergence of living standards is applied and fails to reveal evidence of convergence of tax burdens for the oecd and europe as a whole it does however indicate that there has been some harmonization within smaller groups of countries mainly in northern europe important questions remain about the effectiveness and impact of corporate taxation in an increasingly open and integrated global economy but we find little evidence to support fears that the burden of taxation is being lifted from corporations kenneth stewart and michael webb

the taxing task of taxing transnationals financial and real investment flexibility tax competition and superior economic information by transnationals both create a rationale for corporate income taxation and limit the effectiveness of such taxation while these factors have led to a variety of transnational tax policies such as deferral double taxation apportionment and trade rules very few of these institutional features have been integrated into tax competition and agency models in this paper i show how the integration of investment flexibility tax competition and agency issues is crucial to our understanding of corporate tax policies

dynamic optimal taxation in small open economies abstract this paper examines the effects of perfect capital mobility on the determination of optimal capital taxation it shows that capital movements do not change dramatically the optimal tax path studied for the closed economy in addition the paper provides a counterexample to the standard belief that the worldwide system is the optimal regime of taxation finally it shows that the rate of taxation of the rest of the world is not fundamental to determine the optimal decision of a small economy

regional tax coordination and foreign direct investment this paper analyses the effects of a regionally coordinated profit tax or location subsidy in a model with three active countries one of which is not part of the union and a globally mobile firm we show that regional coordination can lead to two types of welfare gain first for investments that would take place in the union in the absence of coordination a coordinated tax increase can transfer location rents from the firm to the union second by internalising all of the union s benefits from foreign direct investment a coordinated tax reduction can attract more welfare enhancing investment than when member states act in isolation depending on which motive dominates tax levels may thus rise or fall under regional coordination

who offers tax based business development incentives abstract many american communities seek to attract or retain businesses with tax abatements tax credits or tax increment financing of infrastructure projects tifs the evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes if they are located close to state borders and if their states have troubled political cultures ten percent greater median household income is associated with a 3 2 lower probability of offering incentives 10 greater distance from a state border is associated with a 1 0 lower probability of offering incentives and a 10 higher rate at which government officials are convicted of federal corruption crimes is associated with a 1 2 greater probability of offering business incentives tifs are the preferred incentive of communities whose residents have household incomes between 25 000 and 75 000 whereas tifs are much less commonly offered by communities whose residents have household incomes below 25 000 the need to finance tifs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use tifs for local business development

the choice of apportionment factors under formula apportionment thispaperinvestigatesthechoiceofapportionmentfactorsunderacorporatetaxsystemofformulaapportionment in contrast to perceived wisdom we show that the apportionment formula contains both mobile capital and immobile labor factors regardless of whether the formula is determined decentrally by jurisdictions or centrally by a central planner the central planner uses the formula as a corrective instrument to internalize fiscal externalities we calibrate the model to the european union and show that replacing the current system of separate accounting by formula apportionment would substantially increase tax revenue and welfare under both centralized and decentralized formula choices

a spatial model of tax competition with multiple tax instruments abstract this paper presents a model of tax competition with two local jurisdictions in each metropolitan area located along a line segment and many metropolitan areas in the world economy the residents in each local jurisdiction are allowed to commute at a constant cost per mile to work in the other jurisdiction if a lump sum tax can be used then other taxes are not used if source based wage and business capital taxes can both be used then only the former is used in this case or if only a business capital tax can be used the local public good is underprovided

public good provision and the welfare effects of indirect tax harmonisation the paper considers the welfare effect of the harmonisation of indirect taxes in two open economies the revenue from taxation is used for the production of a non tradeable public good the welfare levels are affected via two channels i changes in the levels of public good provision and ii changes in deadweight loss associated with the taxes we develop a number of rules of harmonisation and derive conditions under which they lead to potential pareto improvement

tax incidence majority voting and capital market integration we re examine from a political economy perspective the standard view that higher capital mobility results in lower capital taxes a view in fact that is not confirmed by the available empirical evidence we show that when a small economy is opened to capital mobility the change of incidence of a tax on capital from capital owners to owners of the immobile factor may interact in such a way with political decision making so as to cause a rise in the equilibrium tax this can happen whether or not the immobile factor labour can be taxed and whether or not savings can be subsided under capital mobility d 2005 published by elsevier b v

federal deposit insurance regulatory policy and optimal bank capital this paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the fdic essentially the fdic sells two products insurance and regulation to span the product space it must and does set two prices we argue that the need to establish regulatory disincentives to bank risk taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value i e the value of their right to continue in business stands at the center of these disincentives and in front of the fdic s insurance reserves just as a book shouldn t be judged by its cover a government agency shouldn t be judged by the words behind its initials with the fdic federal deposit insurance corporation the agency s name describes only part of its formal operations the fdic is quasi governmental has a regional structure and sells deposit insurance however the initials fail to convey the fdic s critical place in the governmental regulatory structure as the sole federal overseer of the approximately 8900 state chartered commercial banks that have chosen not to belong the federal reserve system reflecting the federal reserve s membership problem the number of these banks is growing year by year besides selling deposit insurance at bargain explicit rates the fdic performs four regulatory functions 1 entry regulation it passes on new banks applications for deposit insurance and on branch and merger proposals as well thereby protecting the value of existing bank charters 2 examination two thirds of fdic employees are concerned with inspecting bank records and supervising managerial activity 3 regulation of deposit rates and conditions for withdrawal by tradition fdic policies on these matters conform entirely with regulations applicable to federal reserve member banks and 4 disposition of failed banks when an insured bank fails the fdic usually chooses not to liquidate it 2

residence and source based capital taxation in open economies with infinitely lived consumers abstract in this paper we investigate tax competition in a neoclassical growth model where each country may use both residence and source based capital taxes we show that both types of capital taxes are zero at any interior steady state just as in a closed economy for symmetric countries and even for countries that differ only with respect to size and productivity we prove analytically and verify numerically that the open economy policies coincide exactly with the closed economy policies in all time periods for countries that are asymmetric in other dimensions we find that source based taxes are used to manipulate the intertemporal terms of trade in the short run either way the fiscal externalities of source based taxes vanish once residence based taxes are allowed

taxation of asset income in the presence of a world securities market abstract this paper examines a capm model of world security prices in which governments recognize their ability to influence international security prices via their tax treatment of foreign and domestic investors in this model governments have the incentive to set tax rates such that investors tend to specialize in domestic securities and to restrict net capital flows between countries each country does this to increase the utility of domestic residents taking as given the tax policies of other governments but the net outcome is a reduction in world efficiency and likely a reduction in the utility of all investors

tax structure and government expenditures with tax equity concerns abstract we augment a standard tax model by concerns about tax equity people get upset when labour is taxed more heavily than capital even the slightest concern for tax equity invalidates the common tenet that capital remains tax exempt in small open economies this holds for exogenous as well as for endogenous government expenditures and irrespective of whether concerns with tax equity only cause emotional discomfort or also impact on work incentives if concerns with tax equity get more intense the economy may choose higher taxes on labour and move to the downward sloped part of its laffer curve for endogenous government spending stronger concerns with tax equity may lead to a larger size of the public sector

must losing taxes on saving be harmful abstract internationalization offers enhanced opportunities for individuals to place savings abroad and evade domestic saving taxation this paper asks whether the concomitant loss of saving taxation necessarily is harmful to this end we construct a model of many symmetric countries in which public goods are financed by taxes on saving and investment there is international cross ownership of firms and countries are assumed to be unable to tax away pure profits countries then face an incentive to impose a rather high investment tax also borne by foreigners in this setting the loss of the saving tax instrument on account of international tax evasion may prevent the overall saving investment tax wedge from becoming too high and hence may be beneficial for moderate preferences for public goods

the effects of closure policies on bank risk taking abstract this paper models bank closure policy for a risk averse bank that enjoys flat rate deposit insurance we find that increasing the level of net worth at which banks are closed can increase or decrease induced risk aversion as well as increase the likelihood that marginally healthy banks would be subject to extreme moral hazard these result suggest that more timely closure policies should be imposed in conjunction with greater monitoring of bank portfolio risk and with restrictions on risk taking for marginally healthy banks in addition we find that changes in closure policy can increase or decrease desired leverage and that this effect depends on the degree of correlation among asset returns

international tax coordination regionalism versus globalism tax competition for mobile capital can undermine the attempts of governments to redistribute income from rich to poor i study whether international tax coordination can alleviate this problem using a general equilibrium model synthesizing recent contributions to the tax competition literature the model highlights the crucial distinction between global tax coordination and regional coordination with high capital mobility between the tax union and the rest of the world the welfare gain from regional capital income tax coordination is only a small fraction of the gain from global coordination even if the tax union is large relative to the world economy

state and local tax competition in a spatial model with sales taxes and residential property taxes abstract this paper presents a theoretical model with a uniformly populated line that is divided into local jurisdictions and or states if one level of government imposes sales and residential property taxes and if the spatial extent of each taxing jurisdiction is positive and finite then in nash equilibrium the sales tax rate is less than residential property tax rate housing consumption is suboptimal and the public good is underprovided in each jurisdiction if a very large state or country is divided into local jurisdictions and if both levels of government choose tax rates endogenously then under some assumptions there is an efficient outcome

tax evasion in an open economy abstract ignoring tax evasion possibilities a value added and a cash flow income tax have similar behavioral and distributional consequences yet the available means of tax evasion under each can be very different under a vat avoidance occurs through cross border shopping whereas under an income tax it can occur through shifting taxable income abroad given evasion we show that a country would make use of both taxes in order to minimize the efficiency costs of evasion activity relying relatively more on whichever tax is harder to evade we then make use of aggregate danish tax and accounting data from 1992 to measure the amount of evasion that occurred under the two taxes while the estimates of evasion activity are small the figures imply that denmark could reduce the real costs of evasion activity by relying more on value added taxes

incarceration and racial inequality in men s employment to estimate employment population ratios for black and white men with an adjustment for incarceration a factor overlooked by most research on employment inequality the authors combine data from sur

tax evasion tax competition and the gains from nondiscrimination the case of interest taxation in europe this paper uses a game tlieoredc approach to analyse the taxadon of interest income in europe in the presence of tax evasion the model allows tis to assess the success of various reform proposals we argue tbat the tax treatment of nonresidents interest income plays a crucial role when decisions on discriminatio n and on withholding tax rates are made noncooperadvely the outcome is similar to a prisoners dilemma all countries discriminate but in equilihrium internationally mobile portfolio capital evades taxation successfully in contrast if all governments did not discriminate tax competition leads to less tax evasion the integration of capital markets in europe has hrought various benefits at the same time however governments struggle to contain tax evasion international capital flight as an attempt to evade taxes is particularly relevant in the area of taxation of interest income banking secrecy laws in some eu countries and low tax rates in small countries like luxembourg which hoost its role as financial centre have led to the effective elimination ofthe taxation of interest income for some investors the economist speaks not surprisingly about the disappearing taxpayer may 31 1997 several proposals have been made in order to overcome this situation the european commission supports the introduction of a minimum tax rate and or the status of a community resident under the concept of a community resident a country s tax on interest income is independent of the residence of the investor practically realising the source principle by contrast a proposal of the oecd 1977 argues in favour of a maximum withholding tax rate on interest income none of these proposals has been unanimously accepted since gains and losses from non coordinated policies differ greatly across member states the main beneficiary of the present situation is luxembourg which attracts large amounts of foreign capital in particular from germany the united kingdom opposes any coordination for political reasons and because tax coordination may also threaten london s role as the leading financial centre in europe in contrast germany sticks to its traditional bank secrecy law which enables resident investors to evade german taxation by investing abroad

optimal bank reorganization policies and the pricing of federal deposit insurance optimal dynamic regulatory policies for closing ailing banks and for deposit insurance premia are derived as functions of the rate of flow of bank deposits and interest rate on deposits the economy s risk free interest rate and the regulators bank audit administration costs under competitive conditions the threshold assets to deposits ratio below which a bank should be optimally closed is shown to be greater than or equal to one optimal deposit insurance premia and probabilities of bank closure are shown to be nondecreasing in the bank s risk on investment and nonincreasing in the bank s current assets to deposits ratio should regulatory agencies close reorganize an ailing federally insured financial institution if so when the recent record rate of failures of savings and loans associations s ls has renewed the urgency of this question the regulatory agencies are empowered but not required to reorganize financial institutions that are statutorily insolvent i e have zero or negative regulatory net worth recently regulators have in many instances permitted insolvent financial institutions to remain in operation 2 also while debating on the increase of the proposed funding of the federal deposit insurers the u s congress argued whether it would be desirable and if so when to close more s ls thus when regulators should close a troubled financial institution has become a major question of bank regulatory policy while the existing academic literature provides powerful insights into the structure and pricing of the insurers liability this literature offers very little guidance regarding the timing of bank reorganizations 3 indeed to the best of our knowledge the value of the federal

a voluntary brain drain tax abstract a major roadblock to the implementation of bhagwati s proposal to allow developing countries to tax skilled emigrants residing in developed countries the brain drain is the administrative problems associated with collecting this tax in the absence of developed country cooperation this paper provides a partial solution to these problems involving the tax treatment of emigrants who return to their countries of origin the tax system is structured so that returning emigrants who previously paid the brain drain tax face lower tax payments than those who evaded the brain drain tax given the expected value of this tax benefit emigrants are willing to pay the brain drain tax in the basic model a source country s optimal tax system includes this brain drain tax and does not distort migration decisions

managerial rents and regulatory intervention in troubled banks in this paper we investigate the effects of regulatory policies on troubled banks in our analysis banks portfolio decisions are unobservable and are made by management management s decisions are influenced by the compensation and intervention policies of shareholders and regulators as well as the impact of its portfolio choice on its share of firm specific rents we demonstrate that firm specific rents may induce managers to prefer risky asset portfolios these incentives may be exacerbated by shareholder designed compensation contracts intended to align managerial and stockholder interests depending on the parametric specifications of the model both the often criticized practice of regulatory forbearance and the compensation regulations proposed in the federal deposit insurance corporation improvement act of 1991 may form part of the deposit insurance loss minimizing regulatory policy

taxation and inflation a new explanation for capital flows abstract in a world of mobile capital the current system of taxation implies that the after tax cost of capital and return to saving in each country are negatively correlated with the rate of inflation thus a country s net foreign asset position ought to be negatively correlated with its long run inflation rate the magnitude of these effects is shown to be potentially large for oecd countries cross section and time series regressions confirm that inflation rates are good predictors of net foreign assets the existing distribution of net foreign assets may therefore largely reflect tax distortions

the impact of corporate and personal income taxes on the location of firms and on employment some panel evidence for the swiss cantons abstract the impact of corporate income taxes on location decisions of firms is widely debated in the tax competition literature tax rate differences across jurisdictions may lead to distortions of firms investment decisions empirical evidence on tax induced relocation and subsequent economic development in the us and europe is still inconclusive much the same applies to switzerland while there is some evidence on personal income tax competition between swiss cantons evidence on the impact of intercantonal corporate income tax differences on the location of business within switzerland is missing in this paper we present econometric evidence on the influence of corporate and personal income taxes on the regional distribution of firms in 1981 and 1991 and on cantonal employment using a panel data set of the 26 swiss cantons from 1985 to 1997 the results show that corporate and personal income taxes deter firms to locate in a canton and subsequently reduce cantonal employment

tax evasion tax competition and gains from nondiscrimination with equilibrium mixed strategies abstract this note extends janeba and peters econ j 109 1999 93 paper on tax evasion and tax competition by allowing for equilibrium mixed strategies it shows that discrimination is still the weakly dominant strategy for both countries

the role of human capital in earnings differences between black and white men d uring the past 50 years the earnings of black men have increased substantially both in absolute terms and relative to those of white men as shown in figure 1 in 1940 the black white weekly earnings ratio among men ages 25 34 was 49 percent by 1980 it had increased to 79 percent during the 1980s however the overall black white earnings gap did not narrow and at younger ages the gap actually widened although the 1980s is not the first decade since 1940 in which black men made little or no gains in relative earnings the 1950s was another the lack of progress in the 1980s is nevertheless puzzling and a source of concern this article examines the factors underlying the differential in earnings between black men and white men with a focus on the role of human capital since 1940 successive generations of black men entering the labor force have been increasingly more educated relative to white men both in terms of years of school completed and in the quality of schooling obtained as the education and income levels of black parents increased racial differences in the transmission of human capital in the home were also likely to have narrowed this convergence in educational differences combined with the migration of blacks out of the south contributed to the narrowing in the racial gap in earnings over the 1940 80 period particularly in the first half of the period but human capital factors education and migration were not the only source of convergence in black white differences in earnings the patterns of change in the earnings gap support the contention that declining labor market discrimination against blacks has also contributed to the rise in the black white earnings ratio moreover the acquisition of human capital itself has been strongly affected by societal and governmental discrimination since blacks were long provided with greatly inferior schooling resources

economic freedom and taxation is there a trade off in the locational competition between countries this paper investigates the relationshipbetween economic freedomand taxation we argue that an economicallyfree environment improvesthe attractiveness of a location which inturn enables governmentsto levy higher business taxes to test thishypothesis empirically weestimate the impact of economic freedom onthe national tax policy where the latter is measured by thecorporate tax revenue related tognp corporate tax ratio we utilize adata set of 46 developed and lessdeveloped countries between 1980 and 1997and find a clear confirmationof our hypothesis further a simulationanalysis reveals that the observedchange in economic freedom has equalizedthe international distributionof corporate tax ratios

hypergrowth in an east asian nic public policy and capital accumulation in singapore abstract singapore has produced the world s highest investment ratios known to account for growth more rapid than in any other less developed country over the past three decades but such high investment needs explanation we trace singapore s public policy of increasing tax concessions and infrastructural spending in effect subsidies to private firms and use an open economy neoclassical model to show how by attracting footloose foreign capital and raising investment levels these policy measures can drive growth the consequent transformation of living standards in singapore suggests in accordance with theory but contrary to most practice that for some less developed countries effectively zero tax on foreign direct investment may be a beneficial strategy yet for both singapore and other would be late industrializers major issues of development strategy arise from the kind of input driven growth analyzed in this article

on capital income tax policies under uncertainty this paper investigates corporate income and dividend taxation in a multi country world where production is subject to country specific productivity shocks singlecountry non cooperative tax policy is shown to imply a tax on foreign source dividends and a subsidy to domestic source dividends the optimal corporate tax may be negative if international portfolios are little diversified at the outset finally each country in a coordinating region should subsidize rather than tax domestic citizen s investment in equity in partner countries 1998 elsevier science b v all rights reserved

european tax harmonisation and production efficiency this paper analyses the impact on production efficiency of potential harmonisation of the taxation of income from capital in the european union it develops and applies a methodology for computing the cost of capital for transnational investments to assess the degree to which production efficiency holds in the eu it considers the impact of potential forms of corporation tax harmonisation the results indicate that some commonly advocated reforms e g harmonising tax rates or tax bases would not significantly move the tax system towards production efficiency but that other reforms which affect the taxation of cross border flows would have more impact

international tax competition and gains from tax harmonization abstract in a world economy there are two types of distortions which can be caused by capital income taxation in addition to the standard closed economy wedge between the consumer saver marginal intertemporal rate of substitution and the producer investor marginal productivity of capital i international differences in intertemporal marginal rates of substitution implying an inefficient allocation of world savings across countries and ii international differences in the marginal productivity of capital implying an inefficient allocation of world investment across countries the paper focuses on the structure of taxation for countries which are engaged in tax competition and on potential gains from a tax harmonization we show that if the competing countries are sufficiently coordinated with the rest of the world then tax competition leads each country to apply the residence principle of taxation and there are no gains from tax harmonization if however there is not sufficient coordination then tax competition leads to low capital income taxes and the tax burden falls on the internationally immobile factors the outcome is nevertheless still efficient relative to the available constrained set of tax instruments

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

school quality and black white relative earnings a direct assessment the wage differential between black and white men fell from 40 percent in 1960 to 25 percent in 1980 it has been argued that this convergence reflects improvements in the relative quality of black schools to test this hypothesis we assembled data on pupil teacher ratios annual teacher pay and term length for black and white schools in the eighteen segregated states from 1915 to 1966 these data are linked to estimated returns to education for southern born men from different cohorts and states in 1960 1970 and 1980 improvements in the relative quality of black schools explain 20 percent of the narrowing of the black white earnings gap between 1960 and 1980

the taxation of financial capital under asymmetric information and the tax competition paradox information sharing between governments is examined in an optimal taxation framework we introduce a taxonomy of alternative systems of international capital income taxation and characterize the choice of tax rates and information exchange the model reproduces the conclusion found in earlier literature that integration of international caopital markets may lead to the under provision of publicly provided goods however in contrast to previous results in the literature under provision occurs due to inefficiently coordinated expectations we show that there exists a second equilibrium with an efficient level of public good provision as well as complete and voluntary information exchange between national tax authorities

tax competition tax exporting and higher government choice of tax instruments for local governments abstract this paper presents a theoretical model with tax exporting due to external ownership of a fraction of the land in each local jurisdiction there are n local jurisdictions in a metropolitan area n 1 and many metropolitan areas in a world economy the paper examines the usage of business property taxes and source based wage taxes by local jurisdictions first in the presence of and then in the absence of residence based lump sum taxes and how this depends on and n the paper then examines the choice of a world national or state government as to whether to allow local metropolitan or sub metropolitan governments to use business property taxes wage taxes or both assuming that the local governments choose the actual tax rates

tax competition and tax structure in open federal economies evidence from oecd countries with implications for the european union tax competition arguments suggest that governments that operate in an open economy such as local governments should not and will not rely on non benefit taxes such as the income tax yet we observe reliance on income taxes by local governments in many countries and such reliance changes over time evidence from a panel data set of 13 oecd countries over the period 1975 1984 suggests that competition between levels of government resulting in a vertical fiscal externality and between levels of government at the same level resulting in a horizontal fiscal externality provide some economic rationale for these changes moreover the evidence indicates that the vertical and horizontal fiscal externalities interact these results have some interesting implications for fiscal policy in the european union particulary as the eu continues to evolve one implication for the eu is that enlargement that increases tax base disparities within the eu and is not accompanied by an eu level income tax will tend to lower national income tax rates although this must be qualified because it also depends on the mobility of the population a second implication is that fiscal expansion of the eu to include an eu levelincome tax may tend to lower the reliance of national governments on income taxes through the vertical externality but may also tend to equalize tax bases across countries and so increase reliance on national income taxes through the horizontal externality

trade capital mobility and tax competition this paper examines a system of governments national state or local that finance public expenditures with taxes on mobile capital e g a property tax unlike previous research on tax competition explicit consideration is given to the general equilibrium determination of the prices at which goods are traded between regions the analysis identifies inefficiencies in government behavior that are not apparent in models in which the terms of trade are exogenously given capital taxation is shown to create an inefficient distribution of public good outputs across regions accompanied by an inefficient pattern of trade a model is presented in which the chosen levels of public good outputs differ across regions containing identical residents and production possibilities there is a wasteful diversity of public good supplies

taxation of investment and savings in a world economy the equilibrium of capital and equilibrium market prices are derived for a world economy with a unified securities market mobile capital no uncertainty and varying tax rates on different sources of income in each country the paper then characterizes optimal tax rates for a small country in this setting focusing on the peculiar incentives created when the before tax rate of return differs among securities due to differences in their typical tax treatment copyright 1986 by american economic association

a three input model of the spatial effects of a central city wage tax abstract this paper considers the short run and long run spatial effects on wages employment and business capital as functions of location of a localized increase in wage tax rates the model is most applicable to a central city that has a higher wage tax rate than the surrounding suburbs the inclusion of land as a third input in production significantly reduces the long run effects of a central city wage tax on employment near the central city boundary as compared with a model in which labor and capital are the only two inputs the short run effects are significantly less than the long run effects

tax competition with parasitic tax havens we develop a tax competition framework in which some jurisdictions called tax havens are parasitic on the revenues of other countries the havens use real resources to help companies camouflage their home country tax avoidance and countries use resources in an attempt to limit the transfer of tax revenues to the havens the equilibrium price for this service depends on the demand and supply for such protection recognizing that taxes on wage income are also evaded we solve for the equilibrium tax rates on mobile capital and immobile labor and we demonstrate that the full or partial elimination of tax havens would improve welfare in non haven countries in part because countries would be induced to increase their tax rates which they have set at inefficiently low levels in an attempt to attract mobile capital we also demonstrate that the smaller countries choose to become tax havens and we show that the abolishment of a sufficiently small number of the relatively large havens leaves all countries better off including the remaining havens

yardstick competition and partial coordination exploring the empirical distribution of local business tax rates abstract this paper explores a striking form of tax policy interdependence that can be observed in the german federation though municipalities enjoy discretion in setting the local business tax rate large fractions of municipalities in some states even the majority set identical tax rates our analysis shows that this tax rate bunching is not the result of federal or state level institutions possible explanations rest on partial coordination and yardstick competition the role of the former is exemplified by the finding that small jurisdictions and jurisdictions sharing the same county are more likely to engage in bunching yardstick competition seems also relevant since jurisdictions for which strategic tax setting should be associated with larger gains and lower cost are in fact more likely to set identical tax rates

the international ramifications of tax reforms supply side economics in a global economy this paper studies tax reforms in a dynamic model of a global economy calibrated to current u s and european tax policies world capital markets add consumption smoothing and income redistribution effects that alter closed economy predictions in the absence of taxes on foreign interest welfare gains of eliminating u s income taxes are enlarged by up to 34 percent at the expense of european losses caused by transitional declines in consumption and leisure and a permanent capital outflow in contrast if foreign interest is taxed the same tax reform reduces u s welfare 0 7 percent and increases european welfare 1 8 percent copyright 1998 by american economic association