@article {4769,
	title = {A Positive Model of Overlapping Income Taxation in a Federation of States},
	journal = {Journal of Public Economics},
	volume = {90},
	number = {4-5},
	year = {2006},
	pages = {703-723},
	abstract = {This paper develops a positive theory of overlapping income taxation in a federation of states. The\&nbsp;analysis provides a complete characterization of the equilibrium federal and states tax rates as\&nbsp;functions of the level of total productivity dispersion between the states. The federal rate is increasing\&nbsp;in the level of total productivity dispersion between the states, even if the income of the decisive voter\&nbsp;at the federal level is above the mean income. Given that the individuals{\textquoteright} income is endogenously\&nbsp;determined there exists a negative trade-off between the implemented federal tax rate and the resulting\&nbsp;states{\textquoteright} tax rates, regardless of the pre-tax income of the decisive voter at the state level. Thus, high\&nbsp;levels of productivity dispersion between the states cause a higher than optimal federal tax rate\&nbsp;together with low states{\textquoteright} tax rates. It is also shown that a system of overlapping income taxation is not\&nbsp;efficient. The resulting inefficiency might be exacerbated by the implementation of a federal matching\&nbsp;grants program, contradicting previous results in the related normative literature.},
	author = {Esteban F. Klor}
}
