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Labor Income Taxes in an Economic Federation with Proportional Membership Fees
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0003-4145-7894
2019 (English)In: International Tax and Public Finance, ISSN 0927-5940, E-ISSN 1573-6970, Vol. 26, no 5, p. 1137-1165Article in journal (Refereed) Published
Abstract [en]

A significant part of the revenue in the EU budget is raised via a GNI-based resource. The purpose of this paper is to use a stylized model of an economic federation to analyze how this way of raising funds to the central authority affects the labor income taxes implemented by the lower-level governments. This question is analyzed both when the federal fee is proportional to GNI and proportional to GDP. One key result is that if the government in a lower-level jurisdiction acts as a Nash follower vis-a-vis the other governments in the public sector, then there is an incentive to implement a higher tax on labor. Another is that if the lower-level government is able to exercise decentralized leadership vis-à-vis a federal government which is concerned with redistribution, then the incentive structure underlying the taxation of labor is independent of how the federal government collects its revenue.

Place, publisher, year, edition, pages
Springer, 2019. Vol. 26, no 5, p. 1137-1165
Keywords [en]
Efficiency, Optimal taxation, Economic federation
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-163493DOI: 10.1007/s10797-019-09537-wISI: 000483757000007OAI: oai:DiVA.org:umu-163493DiVA, id: diva2:1353488
Available from: 2019-09-23 Created: 2019-09-23 Last updated: 2019-11-28Bibliographically approved

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Sjögren, Tomas

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CiteExportLink to record
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Citation style
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