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

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  • MARTINEZ Isabel

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.

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  • MARTINEZ Isabel, 2017. "Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland," LISER Working Paper Series 2017-08, LISER.
  • Handle: RePEc:irs:cepswp:2017-08
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    Cited by:

    1. Katrine Jakobsen & Kristian Jakobsen & Henrik Kleven & Gabriel Zucman, 2020. "Wealth Taxation and Wealth Accumulation: Theory and Evidence From Denmark," The Quarterly Journal of Economics, Oxford University Press, vol. 135(1), pages 329-388.
    2. Isabel Z. Martínez & Emmanuel Saez & Michael Siegenthaler, 2021. "Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays," American Economic Review, American Economic Association, vol. 111(2), pages 506-546, February.
    3. Brülhart, Marius & Gruber, Jonathan & Krapf, Matthias & Schmidheiny, Kurt, 2019. "Behavioral Responses to Wealth Taxes: Evidence from Switzerland," CEPR Discussion Papers 14054, C.E.P.R. Discussion Papers.
    4. Henrik Kleven & Camille Landais & Mathilde Muñoz & Stefanie Stantcheva, 2020. "Taxation and Migration: Evidence and Policy Implications," Journal of Economic Perspectives, American Economic Association, vol. 34(2), pages 119-142, Spring.
    5. Mathilde Munoz, 2019. "How Much are the Poor Losing from Tax Competition: The Welfare Effects of Fiscal Dumping in Europe," Working Papers hal-02876988, HAL.
    6. Mathilde Munoz, 2019. "How Much are the Poor Losing from Tax Competition: The Welfare Effects of Fiscal Dumping in Europe," World Inequality Lab Working Papers hal-02876988, HAL.
    7. Marius Brülhart & Jonathan Gruber & Matthias Krapf & Kurt Schmidheiny, 2016. "Taxing Wealth: Evidence from Switzerland," NBER Working Papers 22376, National Bureau of Economic Research, Inc.
    8. Mathilde Munoz, 2019. "How Much are the Poor Losing from Tax Competition: The Welfare Effects of Fiscal Dumping in Europe," PSE Working Papers hal-02876988, HAL.
    9. Brülhart, Marius & Danton, Jayson & Parchet, Raphaël & Schläpfer, Jörg, 2021. "Who Bears the Burden of Local Taxes?," CEPR Discussion Papers 15826, C.E.P.R. Discussion Papers.
    10. Beatrix Eugster & Raphaël Parchet, 2019. "Culture and Taxes," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 296-337.

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    More about this item

    Keywords

    Mobility; Personal income tax; Tax competition; Local taxes; Regressive income tax;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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