Replication data for: An Estimable Model of Income Redistribution in a Federation: Musgrave Meets Oates

Principal Investigator(s): View help for Principal Investigator(s) Kevin Milligan; Michael Smart

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Project Citation:

Milligan, Kevin, and Smart, Michael. Replication data for: An Estimable Model of Income Redistribution in a Federation: Musgrave Meets Oates. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-13. https://doi.org/10.3886/E114704V1

Project Description

Summary: We develop a theory of cross-border income shifting in response to subnational personal taxation in a federation and examine its implications for the excess burden of personal taxes. We show how a properly chosen federal tax rate can offset the fiscal externality between states and facilitate decentralization, even in a heterogeneous federation where unitary taxation is suboptimal. Optimal taxes depend on the elasticities of national tax avoidance and of cross-state tax base shifting. We estimate these elasticities around a tax decentralization reform in Canada, finding both to be empirically relevant. We discuss the implications for optimal federalism.

Scope of Project

JEL Classification:
      D31 Personal Income, Wealth, and Their Distributions
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
      H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
      H26 Tax Evasion and Avoidance
      H71 State and Local Taxation, Subsidies, and Revenue
      H77 Intergovernmental Relations; Federalism; Secession

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Published Versions

V1 [2019-10-13]

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