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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/116652
Should tax bases overlap in a federation with lobbying?
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Abstract
We examine the tax assignment problem in a federation with two layers of government sharing an elastic tax base, in which Leviathan policy makers levy an excise tax in an imperfectly competitive market and producers lobby for tax rate cuts. If the lobby of producers is very influential on policy makers, we find that taxation by both layers of government might be optimal, provided that the market of the taxed good is highly concentrated; otherwise, it is optimal to assign the power to tax only to one level of government. Taxation by both layers of government is not optimal either when the influence of the lobby is weak, whatever the degree of market power. We also examine a richer set of tax setting outcomes, by considering the possibility that state policy makers have heterogeneous tax policy objectives.
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ESTELLER MORÉ, Alejandro, GALMARINI, Umberto and RIZZO, Leonzio. Should tax bases overlap in a federation with lobbying?. IEB Working Paper 2010/08. [consulted: 9 of June of 2026]. Available at: https://hdl.handle.net/2445/116652