Economic and Political Foundations of Local Tax Structures: An Empirical Investigation of the Tax Mix of Flemish Municipalities

Abstract

Building on the revenue structure theory developed by Hettich and Winer (1984, 1988, 1999, this paper is the first to investigate the economic and political determinants of local tax mix choices. We thereby use panel data on 289 municipalities in the Flemish region of Belgium (period 1995Belgium (period -2002, where local governments enjoy extensive fiscal autonomy and have a wide choice of available tax instruments. Estimating a system of five reduced-form equations for the five central revenue sources (income, property, business, user fees and other own revenues), our results show that economics plays a significantly more important role than politics in shaping the local tax mix. Moreover, supporting theoretical predictions about marginal cost equalization across available tax instruments, absolute reliance on each revenue source increases as the overall revenue requirement gets larger (a 'scaleeffect').

Redistribution at the local level: the case of public childcare in Italy

“…Female mayors tend to define more progressive schedules and to supply more of the service, which leads to more redistribution in their municipalities. This is in line with the existing empirical evidence, which shows that women tend to be more willing to redistribute both as individuals (see for example Guillaud (2013)) and when they act as policy makers (Geys and Revelli, 2011). Another political characteristic with a statistically (weakly) significant effect is the political party in charge.…”

Local Sales Taxes as a Means of Increasing Revenues and Reducing Property Tax Burdens: An Analysis Using Propensity Score Matching

“…This study is based on a large sample, so concerns about standard errors and variance are reduced and, as suggested by Rubin and Thomas (), when in doubt include the covariates of interest. The county characteristics used to create the propensity scores are based on previous studies in public finance and tax mix selection (Hettich and Winer ; Jung ; Sjoquist, Walker, and Wallace ; Geys and Revelli ; Afonso ). These characteristics are discussed in detail below.…”

Cooperation among Local Governments to Deliver Public Services

“…Drawing on the existing literature on local tax setting (see Geys and Revelli ), we include some socioeconomic characteristics of the municipalities: Municipal population and population density. Their respective expected sign is ambiguous.…”