Two sentiments are common among economists who study state and local public finance—that source-based capital taxation by subnational governments is a bad idea, and that state governments are powerless to redistribute income. These claims are consistent with the optimal tax literature, if the...

Purpose – This paper's purpose is to investigate the claim that capital taxes imposed by a subnational government reduce the economic competitiveness of the geographic area in which these taxes are imposed. Design/methodology/approach – A two‐region, four‐good, three‐factor...