How Fiscal Decentralization Flattens Progressive Taxes
Journal
FinanzArchiv
ISSN
0015-2218
ISSN-Digital
1614-0974
Type
journal article
Date Issued
2006-06-01
Author(s)
Abstract
We study the tension between fiscal decentralization and progressive taxation. We present a multi-community model in which households differ in incomes and housing preferences and in which the local income tax rate is a function of an exogenous progressive tax schedule and an endogenous local tax multiplier. The progression of the tax schedule induces a self-sorting process that results in substantial though imperfect income sorting. Considering this income sorting, the resulting tax schedule is less progressive than the exogenous tax schedule. Empirical evidence from the largest Swiss metropolitan area supports the predictions of our model.
Language
English
Keywords
FISCAL DECENTRALIZATION
INCOME SEGREGATION
PROGRESSIVE TAXATION
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Mohr Siebeck
Publisher place
Tübingen
Volume
62
Number
2
Start page
281
End page
304
Pages
24
Subject(s)
Eprints ID
234900