TY  - JOUR
AU  - Hines, James R, Jr.
AU  - Summers, Lawrence H
TI  - How Globalization Affects Tax Design
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14664
PY  - 2009
Y2  - January 2009
DO  - 10.3386/w14664
UR  - http://www.nber.org/papers/w14664
L1  - http://www.nber.org/papers/w14664.pdf
N1  - Author contact info:
James R. Hines
Department of Economics
University of Michigan
343 Lorch Hall
611 Tappan Street
Ann Arbor, MI  48109-1220
Tel: 734/764-2320
Fax: 734/764-2769
E-Mail: jrhines@umich.edu

Lawrence H. Summers
Harvard Kennedy School of Government
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-9322
Fax: 617/495-0436
E-Mail: lhs@harvard.edu
M1  - published as James R. Hines Jr., Lawrence H. Summers. "How Globalization Affects Tax Design," in Jeffrey R. Brown and James M. Poterba, editors, "Tax Policy and the Economy, Volume 23" University of Chicago Press (2009)

M3  - presented at "Tax Policy & the Economy", September 25, 2008
AB  - The economic changes associated with globalization tighten financial pressures on governments of high-income countries by increasing the demand for government spending while making it more costly to raise tax revenue.  Greater international mobility of economic activity, and associated responsiveness of the tax base to tax rates, increases the economic distortions created by taxation.  Countries with small open economies have relatively mobile tax bases; as a result, they rely much less heavily on corporate and personal income taxes than do other countries.  The evidence indicates that a ten percent smaller population in 1999 is associated with a one percent smaller ratio of personal and corporate income tax collections to total tax revenues.  Governments of small countries instead rely on consumption-type taxes, including taxes on sales of goods and services and import tariffs, much more heavily than do larger countries.  Since the rapid pace of globalization implies that all countries are becoming small open economies, this evidence suggests that the use of expenditure taxes is likely to increase, posing challenges to governments concerned about recent changes in income distribution.
ER  -