Date of Award
Doctor of Philosophy (PhD)
Dr. Sally Wallace
Dr. David L. Sjoquist
Dr. Bruce A. Seaman
Dr. William C. Randolph
The objective of this dissertation is to develop a model to examine the concept of a “worldwide” tax burden. The notion is that due to differential mobility of factors developed nations may be passing on a share of their tax burden to less developed countries while effectively indulging in a form of tax competition. This is important for many reasons especially since it may affect the distribution of income between countries, and influence the flow of capital. As globalization increases, “the race to the bottom” in taxation (which implies tax-cutting) suggests that these spillovers should be reduced over time. The traditional view of taxation implies that taxation imposes an excess burden and increasing most types of taxes will increase this burden. But for whom does this burden increase? Are developed countries passing on a burden to locations that are less able to shift the burden forward?
If this phenomenon of tax spillovers can be quantified, we can examine the extent and nature of shifting of the tax burden.
Using a version of the famous general equilibrium model first developed by Prof Harberger in 1962, we analyze the extent of tax spillovers in the presence of a public input in an open economy setting. We model two different taxes, the Capital Income Tax and a Consumption Tax and two different types of expenditure patterns, a government input and a transfer payment.
The dissertation answers the following research questions:
• Can the extent of tax spillovers be quantified using a general equilibrium model that is not dependent on functional forms?
• Does the extent of spillovers depend on the type of tax used?
• Does the extent of spillovers depend on the use to which the taxes are put?
• What are the policy implications?
We find that the tax cutting economy can gain from cutting a distorting tax only when the expenditure pattern is neutral, while imposing a cost to the rest of the world in terms of sources and uses of GDP. When revenues are used to provide productive public goods; neither country gains from tax cuts that lower inputs.
Bhattacharya, Sandeep, "Aspects of Tax Spillovers: Is There a "Worldwide" Tax Burden?." Dissertation, Georgia State University, 2010.