This paper studies the optimal taxation of capital income in a simple model of a small open economy where domestic residents can evade taxes on their foreign investment income. The national government can only tax domestic capital income and can impose capital controls, which, however, absorb...

This paper surveys the literature on the implications of international capital mobility for national tax policies. Our main issue for consideration in this survey is whether taxation of income - specifically capital income - will survive, how border crossing investment is taxed relative to...

This paper compares the second-best optimal tax on polluting consumption goods with the Pigovian tax, which would internalize marginal environmental damage at a second-best optimum. It is shown that the relationship between the optimal tax on polluting consumption and the Pigovian tax is...

This paper develops a theoretical explanation why it may be optimal for higher-level governments to pay categorical block grants or closed-ended matching grants to local governments. We consider a federation with two types of local governments which differ in the cost of providing public goods....

This paper derives sufficient conditions for the time-consistency of optimal fiscal policy in a small open economy. Results depend critically on the debt instruments used by the government. If the government employs only conventional debt, a sufficient condition for time-consistency is that the...

Several recent studies suggest that equalizing transfers in a federal system may distort the tax policy decisions of states. We study this issue for the German federal fiscal system. In a simple theoretical model, we first identify a substitution effect and an income effect of equalizing...