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How Fiscal Decentralization Flattens Progressive Taxes

Hodler, Roland and Schmidheiny, Kurt. (2006) How Fiscal Decentralization Flattens Progressive Taxes. FinanzArchiv: Public Finance Analysis, 62 (2). pp. 281-304.

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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 shifter. The progressivity of the tax schedule induces a self-sorting process that results in substantial though imperfect income sorting. The actual tax structure is thus less progressive than the exogenous tax schedule. Empirical evidence from the largest Swiss metropolitan area supports the predictions of our model.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Angewandte ├ľkonometrie (Schmidheiny)
UniBasel Contributors:Schmidheiny, Kurt
Item Type:Article, refereed
Article Subtype:Research Article
Publisher:Mohr Siebeck
ISBN:
ISSN:0015-2218
e-ISSN:1614-0974
Note:Publication type according to Uni Basel Research Database: Journal article
Language:English
Identification Number:
Last Modified:26 Mar 2018 07:38
Deposited On:07 Apr 2017 07:16

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