A General Accounting Model of Intergovernmental Tax and Benefit Effects on Business

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Abstract
The aim in this paper is to present a systematic treatment of the tax and benefit effects of central (or federal), state and local governments on business. A base model is constructed which reduces all tax and benefit regimes to influences on the user costs of capital. This model is specified for the intergovernmental regimes which apply in the USA, the United Kingdom, and West Germany, for the case of sole traders, partnerships, and corporations. Indications of extensions of the model are given for nonmarginal situations, investments at different levels of risk and uncertainty, and the consequences of tax and benefit shifting away from the point of legal incidence. The resulting model provides a general framework for comparison of tax and benefit regimes between states and localities in one country, between state and local governments in one country, or between state and local governments in one country and those in another.