This paper reviews potential advantages and disadvantages of capital tax competition. Tax competition may introduce, mitigate, or exacerbate inefficiencies in both the private sector and the public sector. In different models, tax competition may either limit or increase public expenditures and taxes on mobile factors, with differing welfare consequences. We also discuss the implications of tax competition for redistributive policies and for policies dealing with risk, and we identify some of the possible empirical implications of tax competition.

David E. Wildasin / dew@davidwildasin.us