Tax Cannibalization and Fiscal Federalism in the United States

82 Pages Posted: 21 Mar 2016 Last revised: 1 Mar 2017

David Gamage

Indiana University Maurer School of Law

Darien Shanske

University of California, Davis - School of Law

Date Written: March 1, 2017

Abstract

The current structure of U.S. federal tax law incentivizes state governments to adopt tax policies that inflict costs on the federal government, at the expense of national welfare. We label this the “tax cannibalization problem.”

This article introduces the tax cannibalization problem to the law and policy literatures for the first time. This article also explains how U.S. federal tax law might be restructured so as to alleviate the tax cannibalization problem — to counteract the perverse incentives currently leading U.S. state governments to design their tax systems so as to, in effect, wastefully devour federal tax revenues.

Keywords: state and local tax, vertical externalities, horizontal externalities, fiscal federalism, tax

Suggested Citation

Gamage, David and Shanske, Darien, Tax Cannibalization and Fiscal Federalism in the United States (March 1, 2017). 111 Northwestern University Law Review 295 (2017). Available at SSRN: https://ssrn.com/abstract=2750933

David Gamage (Contact Author)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

HOME PAGE: http://www.law.indiana.edu/about/people/bio.php?name=gamage-david

Darien Shanske

University of California, Davis - School of Law ( email )

400 Mrak Hall Dr
Davis, CA CA 95616-5201

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