We develop a theory of cross-border income shifting in response to subnational personal taxation in a federation and examine its implications for the excess burden of personal taxes. We show how a properly-chosen federal tax rate can offset the fiscal externality between states and facilitate...

Assigning taxes to regional governments is a major issue in all federations. Although neither the literature nor international experience provides clear guidelines on precisely what taxes should be assigned to states, we suggest that Australia should nonetheless reconsider the advisability of...

A simple theory suggests that a common form of federal horizontal equalization grants should cause subnational governments to levy higher tax rates, distorting local tax bases and so increasing federal transfers. To test this, I examine Canadian provincial tax policies in the 1972-2002 period....