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Tax competition and income sorting

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Abstract

In this paper, we provide empirical evidence for the influence of income taxes on the choice of residence of taxpayers at the local level. The fact that Swiss communities can individually set tax multipliers thereby shifting the progressive tax scheme which is fixed at the cantonal (state) level enables us to study the effect of differences in income taxation on individuals' choice of location within an economically and culturally homogeneous region. Using panel IV regressions covering the years 1991-2003 and 171 communities in the Swiss canton of Zurich and spatial error regressions for the 171 communities in 2003, we find substantial evidence for income sorting.

Suggested Citation

  • Christoph A. Schaltegger & Frank Somogyi & Jan-Egbert Sturm, 2009. "Tax competition and income sorting," KOF Working papers 09-240, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:09-240
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    File URL: http://dx.doi.org/10.3929/ethz-a-005899651
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    Cited by:

    1. Mario Morger, 2013. "What Do Immigrants Value Most About Switzerland? Evidence of the Relative Importance of Income Taxes," CESifo Working Paper Series 4134, CESifo Group Munich.

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    Keywords

    Tax competition; fiscal federalism; income segregation; income tax;

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