We test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an...

This communiqué is based on the following paper: The Costliest Tax of All: Raising Revenue Through Corporate Tax Hikes can be Counter-Productive for the Provinces by Ergete Ferede and Bev Dahlby. Raising taxes can come at a high cost. Not just to taxpayers, of course, but to the economy. Every...

Changes to tax rates are important fiscal events in Canada. They affect the amount of taxes that Canadian households and businesses pay to governments, and the level of economic activity by affecting incentives to work, save, and invest. Thus it is important to understand what factors cause...

Tax rate changes are some of the most significant and far-reaching decisions a government can take. A good understanding of the odds of any such changes is essential for any business debating the timing and location of investments. This paper investigates the factors that affect the timing of...

When considering an increase in their non-residential property tax rates, Alberta municipalities must also take into account the adverse effects such an increase will likely have on business investment in their communities. Based on data on commercial and industrial permit values for 17 Alberta...

We test the hypothesis that the flypaper effect can arise if the recipient government finances part of its expenditures with a distortionary tax. We present a simple theoretical framework that shows how a lump-sum transfer stimulates the marginal expenditures of a recipient government through an...