Residence- and source-based capital taxation in open economies with infinitely-lived consumers

Gross, Till; Klein, Paul; Makris, Miltiadis

doi:10.1016/j.jinteco.2020.103369

Cited by 7 publications

(3 citation statements)

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“…All jurisdictions are identical, and output is a function of a public service, capital and labor. Only capital is mobile across jurisdictions, and immobile workers all provide one unit of labor but dier in initial capital 21Straub and Werning (2020) provide a recent assessment of this result, including cases where it does not hold, and also limitations on its usefulness.22Gross, Klein and Makris (2020b) shows that if residence-based capital taxes are available, then the scal externality of source-based capital taxes disappears. Moreover, even though residence-based taxes are distortionary and capital markets are globally shared, the policy for suciently symmetric open economies is identical in all time periods to that in a closed economy.…”

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confidence: 99%

Local Policy Choice: Theory and Empirics

Agrawal

Hoyt

Wilson

2022

Journal of Economic Literature

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This paper critically surveys the growing literature on the policy choices of local governments. First, we identify various reasons for local government policy interactions, including fiscal competition, bidding for firms, yardstick competition, expenditure spillovers, and Tiebout sorting. We discuss theoretically what parameters should be estimated to determine the reason for competition among local governments. We emphasize how the policy outcomes emerging from this competition are affected by the presence of constraints imposed by higher-level governments. Second, we integrate theoretical and empirical analyses on the effects of fiscal decentralization on mobility, spillovers, fiscal externalities, economic outcomes, and distributional issues. Third, we identify key issues that arise in the empirical estimation of strategic interactions among local governments and highlight recent quasi-experimental evidence that has attempted to identify the mechanism at work. Finally, a synthesis model, containing multiple mechanisms and fiscal instruments, resolves some puzzles and provides guidance for future research. (JEL D72,H20, H71, H72, H73, H77, R51)

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confidence: 99%

Local Policy Choice: Theory and Empirics

Agrawal

Hoyt

Wilson

2022

Journal of Economic Literature

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“…a decrease in reported pro…t) increases the marginal cost of pro…t shifting and, thus, an inverse measure of how elastically pro…t shifting responds to tax rate changes. 22 The optimal marginal tax on capital 23 has a similar structure as T ^ ( ), but its sign is not clearly determined by the assumptions made above. The sign of the tax rate depends on whether and k are complements or substitutes.…”

Section: Tax Revenue Maximizationmentioning

confidence: 99%

Second-Best Source-Based Taxation of Multinational Firms

Becker

2021

SSRN Journal

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I consider a continuum of multinational enterprises (MNEs), which differ in profitability. MNEs employ capital, shift profit to tax havens and may relocate their production facilities to other countries. Source countries provide public inputs and levy taxes. I derive optimal policy choices for different government objectives (to maximize tax revenue, national income or the representative household's utility) allowing for an unrestricted set of tax policy instruments -in contrast to most existing work on corporate taxation. With observable productivity types, source governments set type-dependent lump-sum taxes and attain the first-best allocation. With unobservable productivity types, the optimum source-based tax system consists of a small lumpsum tax (driving low-profit types out of the market) and positive marginal taxes on reported profit. Optimal marginal tax rates on capital inputs are positive if more profitable firms employ more capital. Optimal public inputs are lower than in the first best if they are of higher value to more profitable firm types. I use a sufficient statistics approach (following Saez 2001) to express optimal tax and input choices as functions of elasticities of observable choice variables. Finally, I use the model to evaluate tax policy measures, e.g. the introduction of an effective minimum tax on profits in tax havens, and to derive the welfare properties of tax competition with an unrestricted set of tax instruments.

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“…Straub and Werning (2020) provide a recent assessment of this result, including cases where it does not hold, and also limitations on its usefulness.22Gross, Klein and Makris (2020b) shows that if residence-based capital taxes are available, then the scal externality of source-based capital taxes disappears. Moreover, even though residence-based taxes are distortionary and capital markets are globally shared, the policy for suciently symmetric open economies is identical in all time periods to that in a closed economy.…”

mentioning

confidence: 99%

Local Policy Choice: Theory and Empirics

2020

View full text Add to dashboard Cite

This paper critically surveys the growing literature on the policy choices of local governments. First, we identify various reasons for local government policy interactions, including fiscal competition, bidding for firms, yardstick competition, expenditure spillovers, and Tiebout sorting.We discuss theoretically what parameters should be estimated to determine the reason for competition among local governments. We emphasize how the policy outcomes emerging from this competition are affected by the presence of constraints imposed by higher-level governments. Second, we integrate theoretical and empirical analyses on the effects of fiscal decentralization on mobility, spillovers, fiscal externalities, economic outcomes, and distributional issues. Third, we identify key issues that arise in the empirical estimation of strategic interactions among local governments and highlight recent quasi-experimental evidence that has attempted to identify the mechanism at work. Finally, a synthesis model, containing multiple mechanisms and fiscal instruments, resolves some puzzles and provides guidance for future research.

show abstract

Residence- and source-based capital taxation in open economies with infinitely-lived consumers

Abstract: The version in the Kent Academic Repository may differ from the final published version. Users are advised to check http://kar.kent.ac.uk for the status of the paper. Users should always cite the published version of record.

Cited by 7 publications

References 54 publications

Local Policy Choice: Theory and Empirics

Local Policy Choice: Theory and Empirics

Second-Best Source-Based Taxation of Multinational Firms

Local Policy Choice: Theory and Empirics

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