Business taxes and the electoral cycle

Dirk Foremny and Nadine Riedel

Journal of Public Economics, 2014, vol. 115, issue C, 48-61

Abstract: The purpose of this paper is to assess whether the timing of elections affects tax policy choices. To do so, we exploit information on the German local business tax which is set autonomously by German municipalities. As the dates for local council elections vary across German states, the data allows us to disentangle effects related to the timing of elections from common trends. The findings support the notion of a political cycle in tax setting as the growth in local business tax rates is significantly reduced in the election year and the year prior to the election, while it significantly increases in the year after the election. This pattern turns out to be robust against a number of sensitivity checks.

Keywords: Local business tax choice; Political budget cycles; Political economy; Election cycle (search for similar items in EconPapers)
JEL-codes: D72 H25 H71 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (88)

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Related works:
Working Paper: Business Taxes and the Electoral Cycle (2012)
Working Paper: Business taxes and the electoral cycle (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:115:y:2014:i:c:p:48-61

DOI: 10.1016/j.jpubeco.2014.04.005

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