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Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland

Isabel Martínez ()

No 2017-08, LISER Working Paper Series from LISER

Abstract: This paper analyzes mobility responses to a large, regressive local income tax cut benefiting the top 1% in the Swiss Canton of Obwalden in 2006. DiD estimations comparing Obwalden with neighboring cantons confirm that the reform was successful in increasing the share of rich taxpayers in the canton (+20-30%). Using individual tax data, I find a large elasticity of the inflow of rich taxpayers with respect to the average net-of-tax rate ranging from 3.2 to 6.5. DiD estimates of cantonal revenue, however, show that the tax cuts did not lead to an increase in cantonal tax revenue per capita. This is in line with a theoretical analysis suggesting Obwalden was not on the wrong side of the Laffer curve before the reform.

Keywords: Mobility; Personal income tax; Tax competition; Local taxes; Regressive income tax (search for similar items in EconPapers)
JEL-codes: H31 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2017-05
New Economics Papers: this item is included in nep-eur, nep-mig, nep-pbe, nep-pub and nep-ure
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Working Paper: Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland (2016) Downloads
Working Paper: Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland (2016) Downloads
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