Working Paper and Work in Progress
This paper provides novel evidence on the impact of tax decentralization on citizens' preferences for redistribution. The study leverages results from a large-scale survey experiment implemented in Spain. The experimental design is based on an information treatment which explains the normative power of regional governments in personal income taxation, a feature mostly unknown at baseline. First-stage results show that the treatment increases the salience of this characteristic by 40 percentage points. The treatment increases respondents' aversion against inequality but decreases their support for higher taxes on the rich. Both results are explained by the idiosyncratic identities of respondents. The effect on inequality is driven by individuals with a stronger regional than national identity, while the rejection of higher taxes on the rich is driven by participants which identify more with the nation than the region. Heterogeneous effects on the trust in the central or regional government confirm this pattern. These results shed light on the role of identity in shaping preferences for redistribution and provide novel evidence that redistributive policies work as a local public good when local attachment of citizens is large.
Conference presentation: 5th World Bank/IFS/ODI Tax Conference: The Political Economy of Public Finances
Treatment animation (in Spanish):
Wealth Tax Mobility and Tax Coordination
This paper studies the effects of decentralized wealth taxation on mobility and the effectiveness of tax coordination at mitigating potential inefficiencies and inequalities from wealth tax competition. Using linked administrative wealth and income tax records, we exploit the decentralization of the Spanish wealth tax, after which all regions except Madrid levied positive tax rates. We find that the mobility responses to wealth taxes are within the range of previous mobility estimates for income taxes. These mobility responses generate negative direct and cross-base fiscal externalities, with the losses to personal income tax revenues being six times larger than the direct losses to wealth tax revenues. Mobility also doubles the rate of growth of reported wealth among top wealth holders in the zero-tax jurisdiction. Finally, we show how the number of regions benefiting from tax harmonization depends critically on the cross-base effects of income taxes, but that a minimum tax rate is likely to receive the support of more regions than harmonization.
Revenue Slumps and Fiscal Capacity: Evidence from Brazil (slide deck only)
This paper studies the impact of exogenous revenue shocks on investment in fiscal capacity in Brazil. Using a difference-in-difference event-study design, we analyze budgetary adjustments after an unexpected shock in formula transfers to local governments. A sudden reduction in transfer revenues induces governments to invest in fiscal capacity. Jurisdictions hit by a negative revenue shock increase local tax collection by approximately 30 percent. We show that part of this effect happens through broadening of the tax base, mainly due to additional spending on tax auditors and technicians, and an improvement of property registers.Conference presentation: 5th World Bank/IFS/ODI Tax Conference: The Political Economy of Public Finances
Income insecurity and mental health in pandemic times
Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms
'Ghost Citizens': Using notches to identify manipulation of population-based grants
Strategic Fiscal Interaction across Borders: Evidence from French and German Local Governments along the Rhine-Valley