Tax Policy, Tax Competition, and Fiscal Rules: Insights from a Classroom Experiment and Surveys of Politicians

Janeba, Eckhard

doi:10.1628/001522114x684493

Cited by 6 publications

(3 citation statements)

References 41 publications

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“…This result is robust to the inclusion of a variety of several other town-level characteristics. This finding corresponds with literature that identifies political ideology to be a dominant driver of tax rate choices (Heinemann and Janeba 2011;Ashworth and Heyndels 1997;Janeba 2014;Janeba et al 2017). These studies commonly find that left-leaning politicians (or individuals) choose higher tax rates.…”

Section: Politicians' Beliefs About Revenue Elasticitiessupporting

confidence: 91%

Higher taxes on less elastic goods? Evidence from German municipalities

Blesse

Doerrenberg

Rauch

2019

Regional Science and Urban Economics

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German municipalities have substantial autonomy in setting taxes on two distinct tax bases: business profits and property values. We use this setting and a two-step approach to explore whether implemented tax policy is consistent with the seminal inverse-elasticity rule. First, we estimate the tax elasticity of the two tax bases using event-study and generalized differences-indifferences methods based on the universe of municipalities in 1995-2010. Second, we compare the ratio of the observed tax rates for the two tax bases to the ratio of their estimated elasticities. We find that property is not very responsive to variation in tax rates, whereas business profits respond significantly. While this would suggest that property should be taxed at a higher rate, the data show that this not the case: most municipalities impose relatively higher rates on business profits. This suggests that municipality-level taxation in Germany is inconsistent with the inverse-elasticity rule. We provide suggestive evidence that this finding is explained by politician's imprecise expectations about revenue elasticities as well as re-election concerns.

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Section: Politicians' Beliefs About Revenue Elasticitiessupporting

confidence: 91%

Higher taxes on less elastic goods? Evidence from German municipalities

Blesse

Doerrenberg

Rauch

2019

Regional Science and Urban Economics

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“…Delgado (2012) confirms the importance of political orientation of the local government by examining the local tax mix in Spanish municipalities, especially for the local property tax rate. Janeba (2014) provides additional insights on the existing relationship between fiscal decisions and ideology by reporting results from a survey of politicians and a classroom experiment.…”

Section: Previous Literaturementioning

confidence: 99%

Fiscal Autonomy and EU Structural Funds

2016

Public Finance Review

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In light of the principle of additionality, the inflow of European Union (EU) funds should complement domestic public funds, which are required to cofinance the investment. EU funds should either be unrelated to fiscal decisions of recipient regions, and as such should not affect taxation choices, or they could imply an increase in taxation to finance the additional domestic funds required by the additionality principle. Empirical results linking fiscal autonomy of Italian regions, considered by looking at the number and the level of average tax rates for the regional surcharge on the personal income tax and committed EU funds, suggest the existence of a significant relationship, even after controlling for relevant economic and political factors. The level of average tax rates is lower the more EU funds are received, as is the complexity of the system, measured by the number of income tax brackets.

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“…Interestingly, this effect is entirely driven by participants who are right-of-center to begin with. Furthermore, in a class-room experiment with students as well as in surveys of politicians, Janeba (2014) finds that party preferences correlate with tax choices of students while party affiliation correlates with beliefs of politicians about tax-induced mobility of firms.…”

Section: Introductionmentioning

confidence: 98%