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The allocation of the income tax among different levels of government: a theoretical solution

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  • Ponzano, Ferruccio

Abstract

The purpose of this paper is to show how two competitive governments can simultaneously choose their income taxes. There are two different levels of government in competition: a central government and a local one. The problem is analysed starting from the Leviathan hypothesis and from the theory of incomplete contracts. We assume that a government includes its re-election in its utility function and study the allocation of the income tax rates between the two levels of government, free from any legal or regulatory constraint. We show that the governments are interested in meeting the re-election constraint, but this common interest does not generate an egalitarian allocation of the tax rates.

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  • Ponzano, Ferruccio, 2004. "The allocation of the income tax among different levels of government: a theoretical solution," POLIS Working Papers 40, Institute of Public Policy and Public Choice - POLIS.
    • Handle: RePEc:uca:ucapdv:40
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    Citations

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    Cited by:

    1. Carla Marchese, 2009. "Rewarding the Consumer for Curbing the Evasion of Commodity Taxes?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(4), pages 383-402, December.
    2. Ottone, Stefania, 2006. "fairness: a survey," POLIS Working Papers 57, Institute of Public Policy and Public Choice - POLIS.
    3. Giovanni B. Ramello, 2006. "What'S In A Sign ? Trademark Law And Economic Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 20(4), pages 547-565, September.
    4. Giovanni B. Ramello & Francesco Silva, 2006. "Appropriating signs and meaning: the elusive economics of trademark," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(6), pages 937-963, December.
    5. Marchese, Carla & Montefiori, Marcello, 2005. "Mean voting rule and strategical behavior: an experiment," POLIS Working Papers 49, Institute of Public Policy and Public Choice - POLIS.
    6. Stefania Ottone, 2008. "Are people Samaritans or Avengers?," Economics Bulletin, AccessEcon, vol. 3(10), pages 1-3.
    7. Bernardi, Luigi & Fraschini, Angela, 2005. "Tax system and tax reforms in India," POLIS Working Papers 45, Institute of Public Policy and Public Choice - POLIS.
    8. Guido Ortona & Stefania Ottone & Ferruccio Ponzano, 2008. "A Simulative Assessment of the Italian Electoral System," Springer Books, in: Fabio Padovano & Roberto Ricciuti (ed.), Italian Institutional Reforms: A Public Choice Perspective, chapter 0, pages 21-36, Springer.
    9. Ottone, Stefania, 2004. "Transfers and Altruistic Punishments in Third Party Punishment Game Experiments," POLIS Working Papers 41, Institute of Public Policy and Public Choice - POLIS.
    10. Nicita Antonio & Ramello Giovanni B., 2007. "Property, Liability and Market Power: The Antitrust Side of Copyright," Review of Law & Economics, De Gruyter, vol. 3(3), pages 767-791, December.
    11. Ortona, Guido & Ottone, Stefania & Ponzano, Ferruccio & Scacciati, Francesco, 2008. "Labour supply in presence of taxation financing public services. An experimental approach," Journal of Economic Psychology, Elsevier, vol. 29(5), pages 619-631, November.
    12. Cugno Franco & Ottoz Elisabetta, 2006. "Static Inefficiency of Compulsory Licensing: Quantity vs. Price Competition," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200606, University of Turin.
    13. Levaggi, Rosella & Montefiori, Marcello, 2005. "It takes three to tango: Soft budget constraint and cream skimming in the hospital care market," POLIS Working Papers 48, Institute of Public Policy and Public Choice - POLIS.
    14. Breton, Albert & Scott, Anthony & Fraschini, Angela, 2007. "Explaining differences in environmental governance patterns between Canada, Italy and the United States," POLIS Working Papers 87, Institute of Public Policy and Public Choice - POLIS.
    15. Ortona, Guido, 2004. "Voting for the Electoral System: an Experiment," POLIS Working Papers 42, Institute of Public Policy and Public Choice - POLIS.
    16. Ponzano, Ferruccio, 2005. "Optimal provision of public goods under imperfect intergovernmental competition," POLIS Working Papers 44, Institute of Public Policy and Public Choice - POLIS.
    17. Bissey, Marie-Edith & Ortona, Guido, 2007. "The program for the simulation of electoral systems ALEX4.1: what it does and how to use it," POLIS Working Papers 82, Institute of Public Policy and Public Choice - POLIS.
    18. Stefania Ottone & Ferrucio Ponzano & Roberto Ricciuti, 2009. "Simulating Voting Rule Reforms for the Italian Parliament: An Economic Perspective," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(3), pages 292-304, October.
    19. Bia, Michela, 2007. "The Propensity Score method in public policy evaluation: a survey," POLIS Working Papers 79, Institute of Public Policy and Public Choice - POLIS.
    20. Ponzano, Ferruccio, 2005. "Competition among different levels of government: the re-election problem," POLIS Working Papers 47, Institute of Public Policy and Public Choice - POLIS.
    21. Ottone, Stefania, 2005. "Transfers and Altruistic Punishments in Solomon's Game experiments," POLIS Working Papers 50, Institute of Public Policy and Public Choice - POLIS.
    22. Marchese, Carla & Privileggi, Fabio, 2007. "Increasing the efficiency of the 'Studi di Settore' might backfire," POLIS Working Papers 83, Institute of Public Policy and Public Choice - POLIS.
    23. Mitra, Tapan & Privileggi, Fabio, 2006. "Cantor type attractors in stochastic growth models," Chaos, Solitons & Fractals, Elsevier, vol. 29(3), pages 626-637.
    24. Bia, Michela & Mattei, Alessandra, 2007. "Application of the Generalized Propensity Score. Evaluation of public contributions to Piedmont enterprises," POLIS Working Papers 80, Institute of Public Policy and Public Choice - POLIS.
    25. Ottone, Stefania & Ponzano, Ferruccio, 2005. "An Extension to the Model of Inequity Aversion by Fehr and Schmidt," POLIS Working Papers 51, Institute of Public Policy and Public Choice - POLIS.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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