Majority Choice of Taxation and Redistribution in a Federation

44 Pages Posted: 1 Oct 2018 Last revised: 1 Aug 2021

See all articles by Stephen Calabrese

Stephen Calabrese

University of South Florida - Department of Government and International Affairs; Carnegie Mellon University - David A. Tepper School of Business

Dennis Epple

Carnegie Mellon University; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Richard Romano

University of Florida

Date Written: September 2018

Abstract

We provide a model with a federal government and multiple local governments, the former with power to levy an income tax for redistribution, and the latter choosing a local income tax, property tax, lump-sum tax or subsidy, and a local public good. Policy is set by majority choice at each tier of government by households that differ by income and ability to move across communities. We provide sufficient conditions for existence of equilibrium and examine its properties. Central findings are federal income distribution, little local redistribution, and local preference for property taxation over income taxation to fund local public goods.

Suggested Citation

Calabrese, Stephen and Epple, Dennis and Romano, Richard, Majority Choice of Taxation and Redistribution in a Federation (September 2018). Available at SSRN: https://ssrn.com/abstract=3258196

Stephen Calabrese (Contact Author)

University of South Florida - Department of Government and International Affairs ( email )

Tampa, FL 33620
United States

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Dennis Epple

Carnegie Mellon University ( email )

Tepper School of Business
Pittsburgh, PA 15213-3890
United States
412-268-1536 (Phone)
412-268-7357 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Richard Romano

University of Florida

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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