“Dynamic Tax Externalities and the U.S. Fiscal Transformation,” JME, 2020

Summary:
Journal of Monetary Economics, with Martin Gonzalez-Eiras. PDF. (Appendix: PDF.) We propose a theory of tax centralization in politico-economic equilibrium. Taxation has dynamic general equilibrium implications which are internalized at the federal, but not at the regional level. The political support for taxation therefore differs across levels of government. Complementarities on the spending side decouple the equilibrium composition of spending and taxation and create a role for inter governmental grants. The model provides an explanation for the centralization of revenue, introduction of grants, and expansion of federal income taxation in the U.S. around the time of the New Deal. Quantitatively, it accounts for approximately 30% of the federal revenue share’s doubling in the 1930s,

Topics:
Dirk Niepelt considers the following as important: Centralization, Decentralization, Fiscal federalism, General equilibrium, Grant, Income tax, Politico-economic equilibrium, Research, Tax, United States

This could be interesting, too:

Dirk Niepelt writes “Governments are bigger than ever. They are also more useless”

Dirk Niepelt writes Urban Roadway in America: Land Value

Dirk Niepelt writes “Money and Banking with Reserves and CBDC,” JF, 2024

Claudio Grass writes Interview with Executive Global: “The Return of Marxism in the West”