The fiscal dimensions of capital mobility in a federal economy
Description
This dissertation examines some of the economic efficiency implications of decentralized public decision-making. It ignores direct spillovers of public goods and services and focuses instead on so-called fiscal-externalities, which are said to occur when tax and spending decisions in one community affect another community's fiscal sector (e.g. by expanding or contracting its tax base) The study begins by reviewing some of the work that provides the foundation for this line of inquiry. It then concentrates on describing the economic inefficiency that can occur when local-welfare-maximizing governments make tax and spending decisions in the face of capital mobility. It is argued that some of the results in this area are incorrect or incomplete, and a more thorough analysis is provided The study then goes on to argue that governments tax capital for various reasons, and that, fiscal-externalities from the taxation of capital may be a more general phenomenon than previously recognized. In the penultimate chapter on attempt is made to describe the total welfare loss when communities with differing preferences for public goods use capital taxes to finance those goods. In the process, a synthesis of previous work is provided. The final chapter provides a summary and some further thoughts