How fiscal decentralization flattens progressive taxes

@inproceedings{Hodler2005HowFD,
  title={How fiscal decentralization flattens progressive taxes},
  author={Roland Hodler},
  year={2005}
}
We study the tension between fiscal decentralization and progressive taxation. We present a multi-community model in which households differ in incomes and housing preferences and in which the local income tax rate is a function of an exogenous progressive tax schedule and an endogenous local tax shifter. The progressivity of the tax schedule induces a self-sorting process that results in substantial though imperfect income sorting. The actual tax structure is thus less progressive than the… CONTINUE READING