The Aggregate Consequences of Local Capital Taxation

Antonin Bergeaud, Brouillette, Jean-Félix, Louis de Lachapelle and Malgouyres, Clément

No 21367, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the repeal of France's Taxe Professionnelle, a large local capital tax with rates set by nearly 35,000 municipalities. Combining administrative data with a dynamic spatial general equilibrium model disciplined by reduced-form investment responses, we estimate that the reform raises long-run real income per worker by 8% and welfare by 3\% in consumption-equivalent terms. Most gains come from the lower aggregate tax burden, which increases real wages everywhere. Equalizing tax rates alone has little aggregate effect, as activity shifts from large, low-tax, high-income hubs toward lower-wage locations, rather than raising productivity or capital deepening in the aggregate economy.

JEL-codes: E22 H25 H71 R58 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-pub
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