Optimal Fiscal Reform with Many Taxes

Fiscal Federalism and Optimal Income Taxes

In federal countries, such as the United States, state and local governments play an important role. They provide many different types of local public goods and services and are able to tailor the amount and quality of these goods to the preferences of their constituencies. To provide these services, state and local governments must raise tax revenues from their residents using a menu of differ...

Optimal Fiscal Policy With Oil Revenues

How Fiscal Decentralization Flattens Progressive Taxes

We study the tension between fiscal decentralization and progressive taxation. We present a multi-community model in which households differ in incomes and housing preferences and in which the local income tax rate is a function of an exogenous progressive tax schedule and an endogenous local tax shifter. The progressivity of the tax schedule induces a self-sorting process that results in subst...

Fiscal Decentralization: Theory as Reform

James Edwin Kee, Professor of Public Policy and Public Administration The George Washington University Abstract The last decade has seen a renewed interest in the concept of fiscal decentralization or fiscal federalism. This comes after a half-century of fiscal centralization in most developed and developing nations. This paper examines the theory behind fiscal decentralization and suggests the...

Which border taxes? Origin and destination regimes with fiscal competition in output and emission taxes∗

This paper posits a two-stage game in tax regime and tax rates to study the property of second-best emission and output taxes in a two-country world with an atmospheric externality. It shows that (i) either the destination-destination or the origin-origin tax regime may constitute the subgame perfect Nash equilibrium of this game; (ii) either regime may Pareto-dominate the other; (iii) it is po...