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Tax Competition, Income Differentials and Local Public Services

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  • Eric Smith
  • Tracy Webb

Abstract

This paper examines strategic tax setting between fiscal authorities in the presence of mobile workers who locate across these jurisdictions in response to differing tax structures and congestable local public amenities. We find that the nature of the tax setting outcomes depend crucially on the proximity between cities. For “distant” cities with the same size populations, the pressure on tax rates of a more mobile workforce depends on the whether mobile workers are net beneficiaries or net contributors. If mobile workers are either high or low income earners, cities lower tax rates. If mobile workers are middle income earners, cities raise tax rates. For “close” or neighbouring cities, workers locate in one of the cities and tax rates and local public amenities are dispersed. Copyright Kluwer Academic Publishers 2001

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  • Eric Smith & Tracy Webb, 2001. "Tax Competition, Income Differentials and Local Public Services," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 675-691, November.
    • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:675-691
    DOI: 10.1023/A:1012887009256
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    Cited by:

    1. Beatrix Eugster & Raphaël Parchet, 2011. "Culture and Taxes: Towards Identifying Tax Competition," Cahiers de Recherches Economiques du Département d'économie 11.05, Université de Lausanne, Faculté des HEC, Département d’économie.
    2. Konstantinos J. Liapis & Christos L. Galanos & Evangelos D. Politis & Dimitrios D. Kantianis, 2014. "A Quantitative Approach to Measure Tax Competitiveness Between EU Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 7(3), pages 7-23, December.
    3. Konstantinos Liapis & Antonios Rovolis & Christos Galanos, 2013. "Toward a Common Tax Regime for the European Union Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 93-116.
    4. Petr Wawrosz, 2022. "How Corruption Is and Should Be Investigated by Economic Theory," Economies, MDPI, vol. 10(12), pages 1-23, December.

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