The incentive effect of fiscal equalization transfers on tax policy

• 成果类型: Article; Proceedings Paper
• 署名作者: Buettner, T
• 署名单位: Leibniz Association; Ifo Institut; University of Munich
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2005.09.004
• 发表日期: 2006
• 页码: 477-497
• 关键词: Fiscal equalization; Tax competition; Fiscal federalism; incentive effect of taxation; regression discontinuity

摘要

A theoretical analysis considers the impact of a typical system of redistributive fiscal equalizatioty' transfers on the tax effort of local jurisdictions. More specifically, it shows that the marginal contribution rate, i.e. the rate at which an increase in the tax base reduces those transfers, might be positively associated with the local tax rate while the volume of grants received is likely to be inversely related to the tax rate. These predictions are tested in an empirical analysis of the tax policy of German municipalities. In order to identify the incentive effect the analysis exploits discontinuities in the rules of the fiscal equalization system as well as policy changes. The empirical results support the existence of an incentive effect, suggesting that the high marginal contribution rates induce the municipalities to set significantly higher business tax rates compared with a situation without fiscal equalization. (c) 2005 Elsevier B.V. All rights reserved.