In some states, a local government that reduces its tax base receives additional aid for local public good provision from the state government. Why will cities be more likely to offer tax breaks in this circumstance? Why are tax breaks in this case particularly bad for overall welfare?
Answer to relevant QuestionsThe Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) lowered the top marginal rate for estate taxation, called for a gradual increase in the estate tax exemption (the amount of an estate that is untaxed) to ...Why has the effective capital gains tax rate tended to be substantially lower than the dividend tax rate in the United States? Given that this disparity exists, why do so many firms pay dividends? Different states have different corporate tax rates. How could you use this to study the elasticity of corporate investment with respect to corporate tax rates? What would be the problems with this approach? How would fundamental tax reform likely increase tax efficiency in the United States? While proponents of tax simplification argue that a flat tax would be fairer, in other dimensions a flat tax reduces fairness in the tax system. Why is this so?
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