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Tax Competition and the Choice of Tax Structure in a Majority Voting Model

Discussion Papers 335, 11 S.

Rainald Borck

2003. Mrz.

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Published in: Journal of Urban Economics 54 (2003),1, 173-180


This note studies the choice of tax structure in a majority voting model with tax competition. Regions may tax mobile capital or immobile labor. Individuals differ with respect to their relative endowments of labor and capital. Even though a lump sum tax is available, the equilibrium capital tax in a jurisdiction may be positive. In a symmetric equilibrium, this will be true if the median capital endowment is smaller than average.

Topics: Taxes

JEL-Classification: H77;D72
Keywords: tax competition, voting
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