Bulletin n. 2-3/2012 | ||
October 2012-February 2013 | ||
Giertz Seth, Tosun Mehmet S. |
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Migration elasticities, fiscal federalism and the ability of the States to redistribute income | ||
in National Tax Journal , volume 65 n.4 , 2012 , 1069-1092 | ||
This paper develops a simulation model in order to examine the effectiveness of state attempts at redistribution under a variety of migration elasticity assumptions. Key outputs from the simulation include the impact of tax-induced migration on state revenues, excess burden, and fiscal externalities. With modest migration elasticities, the costs of state-level redistribution are substantial, but state action may still be preferred to a federal policy that is at odds with preferences of a state's citizens. At higher migration elasticities, the costs of state action can be tremendous. Overall excess burden is greater, but this is dominated by horizontal fiscal externalities. Horizontal fiscal externalities represent a cost to the state pursuing additional redistribution, but not a cost at the national level. | ||