How Fiscal Decentralization Flattens Progressive Taxes

Roland Hodler and Kurt Schmidheiny ()

No CESifo Working Paper No. 1575, CESifo Working Paper Series from CESifo Group Munich

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.

Keywords: progressive taxation; fiscal decentralization; income segregation (search for similar items in EconPapers)
JEL-codes: H73 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
Date: 2005
View list of references View citations in EconPapers

Downloads: (external link)
http://www.cesifo-group.de/DocCIDL/cesifo1_wp1575.pdf (application/pdf)

Related works:
Working Paper: How Fiscal Decentralization Flattens Progressive Taxes (2005)
Journal Article: How Fiscal Decentralization Flattens Progressive Taxes (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_1575

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich
Address: Poschingerstrasse 5, 81679 Munich
Series data maintained by Julio Saavedra ().