Who do you blame in local finance? An analysis of municipal financing in Italy

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn a political agency model, we study the effect of introducing a less transparent tax tool for the financing of local governments. We show that lower quality politicians would use more the less transparent tax tool to enhance their probability of re-election. This prediction is tested by studying a reform that in 1999 allowed Italian municipalities to partially substitute a more accountable source of tax revenue (the property tax) with a less transparent one (a surcharge on the personal income tax of residents). Using a Difference in Difference approach, we show that in line with theory, Mayors at their first term in power adopted a higher surcharge on the personal income tax and reduced the property tax rate significantly more than Mayors in their final term.

Economic crisis and fiscal federalism in Italy

“…ICI was followed in 1998 by a municipal surcharge on the personal income tax (IRPEF), which is still applied by local authorities (see Bordignon, Grembi and Piazza, 2013 for further details). Originally, this surcharge was composed of a compulsory part (even though this was never applied) and by a discretionary part up to 0.5%.…”

Electoral Competition with Rationally Inattentive Voters

“…What matters instead is the cost of collecting information on instruments targeted at them vs. those targeted at others. Specifically, the equilibrium would become less distorted if the cost of Finally, and almost trivially, the model could be extended to capture the evidence in Cabral and Hoxby (2012), or Bordignon et al (2010). These empirical papers find that policymakers tend to charge lower tax rates when the visibility of taxation is higher, shifting the tax burden on less visible sources of revenue.…”

“…Moreover, in areas where indirect payment is (randomly) more prevalent, property tax rates are significantly higher. Bordignon et al (2010) study the effects of a tax reform in Italy that allowed municipalities to partially replace a (highly visible) property tax with a (much less visible) surcharge added to the national income tax. Mayors in their first term switched to the less visible surcharge to a significantly greater extent than mayors who were reaching the limits of their terms.…”

“Survival Value and a Robust, Practical, Joyless Individualism”: Thomas Nixon Carver, Social Justice, and Eugenics

“…Any social unit must provide for satisfying certain basic needs, which are conceived to be inherent in the very organic nature of its individual members, through scarce resources available in the environment. For Carver, "the ultimate basis of all social conflict is found in economic scarcity of one form or another" (35). Out of this struggle for existence -combined with the presence of variation 4 among individuals and groups -Carver forged his notion of social justice.…”