TAX COMPETITION, BENEFIT TAXES, AND FISCAL FEDERALISM

As the world becomes more globalized and resources become more interna tionally mobile, the issue of tax competition is moving to the forefro nt of debates surrounding national tax systems. Those who have studied taxation in a federal system of government will recognize that this d ebate is not new. This paper presents the conceptual issues that have arisen concerning tax competition in the fiscal federalism literature, and explores the reasons why the empirical measurement of the effects of tax competition, particularly corporate tax competition, is so dif ficult. Given the complicated nature of the problem and the theoretica l ambiguity on the consequences of tax competition, it should perhaps not be surprising for the empirical literature to find that competitio n sometimes increases and sometimes decreases tax rates.