Center for Policy Research
Property Tax Web Series
Identifying Tax-Setting Responses from Local Fiscal Policy Programs.
Valeria Merlo, Andreas Schanbacher, Georg U. Thunecke, and Georg Wamser
September 2023
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Abstract
This paper studies tax policy interaction among local governments for both mobile and immobile tax bases. We exploit exogenous changes in the local tax setting of German municipalities due to participation in state debt reduction programs to learn about the size, scope and nature of strategic interaction among local governments. Our results suggest strong and significant tax policy responses both in corporate as well as in property tax rates. Our estimates imply response function gradients in the range of 0.3 to 0.7, depending on the type of tax and state. Policy spillovers from property tax rates remain very local, which is consistent with yardstick competition behavior.
This paper was presented by Georg Thunecke (Max Planck Institute, Munich) on September 22, 2023 as part of the 2023-2024 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Cameron LaPoint (Yale University) was the discussant for this presentation.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.