Hoisted from the Comments: Is European Progressivity Tiebout?
By Garett Jones
On the question of how progressive a tax system can be if people can exit, Alexei Sadeski writes:
Interesting theory, Garett.A supporting piece of evidence is that the US has a more progressive national taxation system – far more progressive – than most / all European nations, and it is far far easier to exit the European tax regimes than the US federal regime.Indeed, it is [nigh] impossible for a wealthy individual to exit the US regime.
Mankiw discussed a relevant study here, check the links to Sumner and Yglesias. When you consider that Europeans have high VATs and lower capital taxation than the U.S., the lower progessivity in Europe is almost obvious.
But I’m curious about whether European progressivity is Tiebout-style: Do European economic elites get a better return on their taxes than American elites, as Tiebout might predict? Does the power to flee–even if rarely exercised–increase government efficiency in Europe compared to the U.S. as a whole?