American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Dynamic Capital Tax Competition under the Source Principle
American Economic Journal: Macroeconomics
vol. 14,
no. 3, July 2022
(pp. 365–410)
Abstract
We explore the short- and long-run implications of tax competition between jurisdictions, where governments can only tax capital at source. We do this in the context of a neoclassical growth model under commitment and capital mobility. We provide a new theoretical perspective on the dynamic capital tax externalities that emerge in this model. Numerically, we show that the net capital tax externality is positive in the short run but converges to zero in the long run. We also find that noncooperative source-based capital taxes are initially positive and slowly decline toward zero.Citation
Gross, Till, Paul Klein, and Miltiadis Makris. 2022. "Dynamic Capital Tax Competition under the Source Principle." American Economic Journal: Macroeconomics, 14 (3): 365–410. DOI: 10.1257/mac.20190340Additional Materials
JEL Classification
- D62 Externalities
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H71 State and Local Taxation, Subsidies, and Revenue
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- H87 International Fiscal Issues; International Public Goods
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