Regional Cost-of-Living Adjustments in Tax-Transfer Schemes
35 Pages Posted: 12 Jul 2000 Last revised: 17 Sep 2010
Date Written: February 1995
The federal income tax and major welfare programs do not take into account significant cost-of-living variations among regions. This article considers what adjustments might be appropriate in light of the distributive purposes of tax and welfare systems and concerns about the efficiency of the interregional allocation of resources. Price index problems, differences in amenities, and heterogeneity of individuals' locational preferences are considered.
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