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State‐Federal Resource Tax Rivalry: The Queensland Railway and the Federal Export Tax *
Author(s) -
CASSING J. H.,
HILLMAN A. L.
Publication year - 1982
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1982.tb00371.x
Subject(s) - economics , rivalry , ad valorem tax , economic rent , tax reform , microeconomics , stylized fact , indirect tax , deadweight loss , public economics , welfare , international economics , monetary economics , macroeconomics , market economy
This paper presents a stylized account and analysis of the implications of the intergovernmental tax rivalry which arises between the Queensland and Federal governments in their efforts to tax resource rents. In particular, coal is taxed explicitly through the Federal export levy and implicitly through the Queensland railways ‘excess rail freight’. A game‐theoretic environment thus arises. It is shown that if each government sets its tax rate optimally in reaction to the other government's tax polity, then less revenue is generated at a higher deadweight cost. The optimal cooperative solution is compared to the non‐cooperative equilibrium and the resulting welfare gains are identified.