David Gamage and Darien Shanske (University of California, Berkeley – Boalt Hall School of Law and University of California, Davis – School of Law) have posted Tax Cannibalization and Fiscal Federalism in the United States (Northwestern University Law Review, Forthcoming) on SSRN. Here is the abstract:
The current structure of U.S. federal tax law incentivizes state governments to adopt tax policies that inflict costs on the federal government, at the expense of national welfare. We label this the “tax cannibalization problem.”
This article introduces the tax cannibalization problem to the law and policy literatures for the first time. This article also explains how U.S. federal tax law might be restructured so as to alleviate the tax cannibalization problem — to counteract the perverse incentives currently leading U.S. state governments to design their tax systems so as to, in effect, wastefully devour federal tax revenues.
Highly recommended.