Dynamic Tax Externalities and the U.S. Fiscal Transformation
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Dynamic Tax Externalities and the U.S. Fiscal Transformation. / Gonzalez-Eiras, Martin; Niepelt, Dirk.
I: Journal of Monetary Economics, Bind 114, 10.2020, s. 144-158.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Dynamic Tax Externalities and the U.S. Fiscal Transformation
AU - Gonzalez-Eiras, Martin
AU - Niepelt, Dirk
PY - 2020/10
Y1 - 2020/10
N2 - We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and taxation and create a role for inter governmental grants. The model provides an explanation for the centralization of revenue, introduction of grants, and expansion of federal income taxation in the U.S. around the time of the New Deal. Quantitatively, it accounts for approximately 30% of the federal revenue share's doubling in the 1930s, and for the long-term increase in federal grants.
AB - We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and taxation and create a role for inter governmental grants. The model provides an explanation for the centralization of revenue, introduction of grants, and expansion of federal income taxation in the U.S. around the time of the New Deal. Quantitatively, it accounts for approximately 30% of the federal revenue share's doubling in the 1930s, and for the long-term increase in federal grants.
KW - Faculty of Social Sciences
KW - Fiscal federalism
KW - tax centralization
KW - grants
KW - politico-economic equilibrium
U2 - 10.1016/j.jmoneco.2019.02.007
DO - 10.1016/j.jmoneco.2019.02.007
M3 - Journal article
VL - 114
SP - 144
EP - 158
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
SN - 0304-3932
ER -
ID: 236222525