The macroeconomic effects of taxation in a Federal Europe

Douglas Mair, Anthony J. Laramie

    Research output: Contribution to journalArticle

    2 Citations (Scopus)

    Abstract

    The signing of the Maastricht Treaty in 1992 has created a dilemma for fiscal policy at both a theoretical and a policy level. The conflict between the increasingly important stabilising role for fiscal policy post-Maastricht and the pursuit of fiscal harmonisation requires a re-examination of the theoretical framework within which policy discussion should take place. Orthodox tax incidence theory cannot adequately analyse the macroeconomic effects of taxation and the paper proposes an alternative post-Keynesian approach based on the tax and business cycle theories of Kalecki. To illustrate the applicability of a Kaleckian approach to taxation in a Federal system, the paper presents a discussion of the macroeconomic effects of State and local taxation in the US. It is also shown to be necessary to study the structure of State government receipts, the expenditure functions of State governments, the State government budget stance and the nature of intergovernmental relations in order to identify macroeconomic effects.

    Original languageEnglish
    Pages (from-to)7-22
    Number of pages16
    JournalInternational Review of Applied Economics
    Volume10
    Issue number1
    Publication statusPublished - Jan 1996

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