Working Paper: CEPR ID: DP12491
Authors: Andreas M. Fischer; Lucca Zachmann
Abstract: This paper examines the distributional e ects of interest credits from earlytax payments on average household income at the municipality level. Thehypothesis that households from high-income municipalities pay their incometaxes early is tested in a demand speci cation for interest credit for early taxpayments. The empirical analysis considers regional data from 170 munici-palities in the canton of Zurich from 2007 to 2013. The income elasticity ofinterest credit for early tax payments is estimated to be near unity for thetop 5th percentile of average household income, whereas the same elasticity isbelow one-half for the lower 95th percentile and is statistically insigni cant.The nding that high-income households pay their taxes early supports theview that the rich are not liquidity constrained. Early tax payments makethe tax system more regressive for high-income households.
Keywords: early tax payment; demand for interest credit on early tax payment
JEL Codes: D14; D30; E21; E41; H31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| average household income (D19) | early tax payment behavior (H26) |
| high-income households (R20) | early tax payment behavior (H26) |
| lower-income households (R20) | early tax payment behavior (H26) |
| tax system incentivizing early payments (H26) | distributional implications (D39) |
| high-income households (R20) | benefit from interest credits (G51) |
| tax system (H20) | income inequality (D31) |