The Regional Effects of Changes in National Taxation Regimes

This paper examines the relative effect of changes in tax rates under three differing taxation schemes. Unlike previous modeling attempts, our analysis is performed at a relatively small scale, namely that of a city. We use a data intensive computable general equilibrium (CGE) model of a small city and attempt to analyze the effects on local residents’ real incomes, city revenues and economic growth resulting from increases in tax rates under each of the tax schemes. Results suggest that the relative price effects within each simulated scenario played an important role in the results. The simulations yield straightforward policy prescriptions, at least from the city’s viewpoint.