Taxation under direct democracy

Stephan Geschwind and Felix Roesel

Journal of Economic Behavior & Organization, 2022, vol. 200, issue C, 536-554

Abstract: Do citizens legislate different tax policies than parliaments? We provide quasi-experimental evidence for causal effects of direct democracy. Town meetings (popular assemblies) replace local councils in small German municipalities below a specific population threshold. RD and event study estimates consistently show that direct democracy comes with sizable but selective tax cuts. The burden of property taxes, which apply to all residents, decrease by some 10 to 15 percent under direct democracy. We do not find that business taxes change. Direct democracy allows citizens to design tax policies more individually than voting for a high-tax or low-tax party in elections.

Keywords: Direct democracy; Town meeting; Popular assembly; Constitution; Public finance; Taxation (search for similar items in EconPapers)
JEL-codes: D71 D72 H71 R51 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Taxation under Direct Democracy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:200:y:2022:i:c:p:536-554

DOI: 10.1016/j.jebo.2022.06.005

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