IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Business Taxes and the Electoral Cycle

  • Dirk Foremny
  • Nadine Riedel

The purpose of this paper is to assess whether politicians manipulate the timing of tax rate changes in a strategic way to maximize reelection prospects. To do so, we exploit the German local business tax as a testing ground which is set autonomously by German municipalities. As election dates vary across local councils, the data allows us to disentangle effects related to the timing of elections from common trends. Using a rich panel data-set for German municipalities, we assess the impact of elections on local business tax choices. The findings support the notion of a political cycle in tax setting behavior as the growth rate of the local business tax is significantly reduced in the election year and the year prior to the election, while it jumps up in the year after the election. This pattern turns out to be robust against a number of sensitivity checks.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-02/cesifo1_wp3729.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3729.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:ces:ceswps:_3729
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Linda Veiga & Francisco Veiga, 2004. "Political business cycles at the municipal level," ERSA conference papers ersa04p427, European Regional Science Association.
  2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller & Doug Miller, 2009. "Robust Inference with Multi-way Clustering," Working Papers 98, University of California, Davis, Department of Economics.
  3. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2004. "Horizontal and Vertical Indirect Tax Competition: Theory and Some Evidence From the USA," CEPR Discussion Papers 4470, C.E.P.R. Discussion Papers.
  4. Kneebone, R.D. & McKenzie, K.J., 1998. "Electoral and Partisan Cycles in Fiscal Policy: an Examination of Canadian Provinces," Papers 98-06, Calgary - Department of Economics.
  5. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, June.
  6. Arulampalam, Wiji & Devereux, Michael P. & Maffini, Giorgia, 2012. "The direct incidence of corporate income tax on wages," European Economic Review, Elsevier, vol. 56(6), pages 1038-1054.
  7. Dahlberg, Matz & Mörk, Eva, 2008. "Is there an election cycle in public employment? Separating time effects from election year effects," Working Paper Series 2008:3, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Lindbeck, Assar, 1976. "Stabilization Policy in Open Economies with Endogenous Politicians," American Economic Review, American Economic Association, vol. 66(2), pages 1-19, May.
  9. Buettner, Thiess, 2003. "Tax base effects and fiscal externalities of local capital taxation: evidence from a panel of German jurisdictions," Journal of Urban Economics, Elsevier, vol. 54(1), pages 110-128, July.
  10. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  11. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  12. Michael A. Nelson, 2000. "Electoral Cycles and the Politics of State Tax Policy," Public Finance Review, , vol. 28(6), pages 540-560, November.
  13. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  14. John Mikesell, 1978. "Election periods and state tax policy cycles," Public Choice, Springer, vol. 33(3), pages 99-106, January.
  15. Schuknecht, Ludger, 2000. " Fiscal Policy Cycles and Public Expenditure in Developing Countries," Public Choice, Springer, vol. 102(1-2), pages 115-30, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3729. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.