Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26386 
Authors: 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2341
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
The paper examines the question how fiscally strong and fiscally weak states respond to taxing autonomy at the state level, a subject that is currently under debate in Germany where states do have virtually no power to tax. We use a simple theoretical model that incorporates state surtaxes on the federal income tax bill taking into account fixed costs as well as minimum standards for the provision of public services. We show that both factors work in the direction of forcing fiscally weak states to collect higher surtaxes as compared to fiscally strong states. The empirical section presents evidence on the importance of fixed costs at the state level and calculates the distributional effects of taxing autonomy taking feedbacks of the fiscal equalization system into account. In addition simple estimates of the importance of spending on minimum standards are derived.
Subjects: 
Fiscal federalism
minimum standards
tax autonomy
fiscal equalization
JEL: 
H11
H50
H71
Document Type: 
Working Paper
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