The 1980s catalyzed formal modeling of how subnational tax settings interact with mobile capital, elevating the study of tax competition and federalism. Researchers developed equilibrium frameworks that illuminated strategic tax setting, policy coordination needs, and the potential for race-to-the-bottom dynamics, aligning tax policy questions with capital mobility and policy design. This synthesis connected domestic tax choices to international and interregional investment flows, shaping subsequent theoretical and policy debates in open economies. Historical Significance: The period established core analytical archetypes for analyzing how tax regimes influence location and investment decisions across regions, providing a foundation for optimal tax design in the presence of mobility and informing later cross-border tax considerations and development tax policy debates.