[Show abstract][Hide abstract] ABSTRACT: This paper explores a number of possible arguments for taking state and local tax payments into account in the federal income tax base. Traditional arguments regarding benefit spillovers and tax exporting are more consistent with targeted intervention at a less centralized level. Applications of commodity tax arguments to this setting suggest that there could be equity gains to taxing rather than subsidizing at least property tax payments. Yet, two key fiscal externalities can justify subsidies to state and local taxes. First, other states gain from more progressive taxation in any given state due to the induced mobility of net payers and net recipients, and this externality can be internalized via a subsidy that grows with the degree of within-state redistribution. Second, taxes on businesses are potentially fully deductible under the income and payroll taxes, so that any less favorable treatment of state and local taxes paid by individuals distorts states' choice of tax structure. We estimate in each case that the optimal Federal subsidy rate is more generous than the current policy.
[Show abstract][Hide abstract] ABSTRACT: This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the relationships among the main functions of taxation -- notably, raising revenue, redistributing income, and correcting externalities -- and the mapping between these functions and various forms of taxation. Different types of taxation as well as expenditures on transfers and public goods are each integrated into a common optimal tax framework with the income tax and commodity taxes at the core. Additional topics addressed include a range of dynamic issues, the unit of taxation, tax administration and enforcement, and tax equity.
Data provided are for informational purposes only. Although carefully collected, accuracy cannot be guaranteed. The impact factor represents a rough estimation of the journal's impact factor and does not reflect the actual current impact factor. Publisher conditions are provided by RoMEO. Differing provisions from the publisher's actual policy or licence agreement may be applicable.