We introduce tax competition for mobile labor into an optimal-taxation model with two skill levels. We analyze a symmetric subgame-perfect Nash equilibrium of the game between two governments and two taxpayer populations. Tax competition reduces the distortion from the informational asymmetry...

Tax competition is discussed as a source of inefficiency in international taxation and in fiscal federalism. Two preconditions for the existence of such effects of tax competition are that mobile factors locate or reside in jurisdictions with ceteris paribus lower tax rates and that taxes are...

We extend the literature on local income tax competition by allowing for inter-jurisdictional spillovers and imperfect rivalry in consumption of a publicly provided good. Comparing decentralized second-best results of a theoretical model with an efficient benchmark, we identify three...

The residence-based taxation of interest income in the EU faces the difficulty that taxpayers may evade taxation by holding bank accounts in other countries. The EU therefore makes considerable efforts to achieve cooperation among EU member states in order to improve tax enforcement. The present...

An important issue in public policy debates is the effect of international migration on welfare in source and host countries. We address this issue by constructing a general equilibrium model of a two-class source or host country. Each country produces many traded and non-traded goods, uses...

Recent estimates of the marginal cost of public funds differ substantially. Some studies argue that the efficiency cost of taxation counter the welfare gain connected to redistribution of income. Hence, the efficiency cost of taxation should not be included as a cost of public goods provision....

Both buyers and sellers of goods and services may bene.t from letting their economic transactions go unrecorded for tax purposes. The supplier reduces his tax burden by underreporting income, whereas the consumer gains from buying a non-taxed lower-priced product. The distributional implications...

The semi-dual income tax typically combines a progressive tax schedule for labour and pension income with low and often flat and differentiated nominal tax rates on some forms of capital income. This paper discusses the rationale for the adoption of semi-dual income tax in the taxation of...

With varying aptitudes in different occupations, individuals typically maximize income by specializing in one occupation which promises the highest income. Due to numerous labor market imperfections and uncertainties, the choice of best occupation is accomplished with only partial success. We...

This paper analyzes the treatment of commuting expenses by the income tax code from a normative and a positive point of view within a continuous space framework with endogenous residence choices and perfect labor mobility. As commuting expenses should never be deductible from the income tax base...