A note on production taxation and public-input provision

Matsumoto, Michi; Sugahara, Kota

doi:10.1007/s00168-017-0837-2

Cited by 4 publications

(1 citation statement)

References 17 publications

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“…7. See Matsumoto (1998Section 3.1, 2004, 2016, Wilson (2005), Hindriks, Peralta, andWeber (2008), andSugahara (2017). In earlier theoretical studies on productive public services, such as Hillman (1978), McMillan (1979), andFeehan (1989), factor-augmenting public inputs have been regarded as a plausible specification.…”

Section: Discussionmentioning

confidence: 99%

Public Input Provision, Tax Base Mobility, and External Ownership

Matsumoto

2021

Public Finance Review

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This article investigates the distortionary impacts of tax base mobility and external ownership on public input provision. Regional governments compete for mobile tax bases (e.g., business capital). The impact of regional public policy partially accrues to non-residents because immobile factors (e.g., business land) are subject to external ownership. This article derives an optimal rule for regional public input provision that illustrates how these two distortionary impacts depend on the nature of production functions. The impact of external ownership is particularly complex. To explore this impact in detail, the case of production functions with constant elasticity of substitution is examined. Public inputs with different productivity impacts yield fairly different implications of external ownership for inefficient public input provision.

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Section: Discussionmentioning

confidence: 99%

Public Input Provision, Tax Base Mobility, and External Ownership

Matsumoto

2021

Public Finance Review

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Sub-metropolitan tax competition with household and capital mobility

2018

Int Tax Public Finance

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This paper investigates the efficiency properties of tax competition between submetropolitan jurisdictions when capital, residents and workers are mobile, and both households and firms compete for local land markets. We analyze two decentralized equilibria: (1) with a local tax on residents and two separate local taxes on capital and land inputs, efficiency is achieved and the existence of a marginal fiscal cost due to residents' mobility is revealed; (2) combination of the taxes on capital and land inputs into a single business property tax leads local authorities to charge inefficiently high taxation on capital. We show that capital mobility induces a reduction in the business land taxation and local public inputs are used to offset the distorting effects of the property tax, accounting for the distorting impact of workers' mobility.

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Tax competition and the efficiency of “benefit-related” business taxes

Gugl

Zodrow

2018

Int Tax Public Finance

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The conventional wisdom in public …nance is that local governments should …nance public services, including those provided to businesses, with user charges that function as bene…t taxes, and should in particular avoid in-e¢ cient source-based taxes on highly mobile capital. However, if user charges are not available or infeasible, several public …nance experts have recently suggested that taxes on local production, such as an origin-based VAT, are a desirable alternative in that they serve as relatively e¢ cient "bene…t-related" taxes. We examine this contention formally in a model in which business public services must be …nanced with either a source-based tax on mobile capital, such as a property tax, or a tax on production, such as an origin-based VAT. In general, both a capital tax and a production tax are ine¢ cient. However, consistent with the "bene…t-related" view, the production tax is e¢ cient if the production function belongs to the knife-edge case between log sub-and log supermodularity with respect to capital and public services (e.g., a Cobb-Douglas production function), while the capital tax results in underprovision of public services in this case. Similarly, if the production function is log submodular with respect to capital and public services (e.g., a CES production function with substitution elasticity greater than one), a production tax is again less ine¢ cient than a capital tax, although both taxes result in underprovision of the public service. Finally, if the production function is log supermodular (e.g., a CES production function with substitution elasticity smaller than one), a production tax results in overprovision of the public service, while the e¤ects of a capital tax-and thus the relative e¢ ciency properties of the two taxes-are theoretically ambiguous.

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A note on production taxation and public-input provision

Cited by 4 publications

References 17 publications

Public Input Provision, Tax Base Mobility, and External Ownership

Public Input Provision, Tax Base Mobility, and External Ownership

Sub-metropolitan tax competition with household and capital mobility

Tax competition and the efficiency of “benefit-related” business taxes

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