Skip to main content
Article thumbnail
Location of Repository

Vertical income tax externalities and fiscal interdependence: Evidence from the US Model

By Alejandro Esteller-Moré and Albert Solé-Ollé


Concurrent taxation is a feature of many federal systems. As a result, the tax policy of one level of government affects the tax base of the other. A way to check the empirical relevance of this hypothesis is to test for the existence of interdependencies in the tax setting behaviour of various layers of government. Following this approach, this paper estimates the reaction of U.S. state personal income and general sales taxes to federal tax rates, taking into account the special features of the U.S. tax system. We find that when the federal government increases taxes, there is a significant positive response of state taxes.Fiscal federalism, Tax deductibility, Vertical tax externalities

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.