Working Paper: CEPR ID: DP14054
Authors: Marius Brülhart; Jonathan Gruber; Matthias Krapf; Kurt Schmidheiny
Abstract: We study how reported wealth responds to changes in wealth tax rates. Exploiting rich intra-national variation in Switzerland, the country with the highest revenue share of annual wealth taxation in the OECD, we find that a 1 percentage point drop in the wealth tax rate raises reported wealth by at least 43% after 6 years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility and 20% from house price capitalization. Savings responses appear unable to explain more than a small fraction of the remainder, suggesting sizable evasion responses in this setting with no third-party reporting of financial wealth.
Keywords: wealth taxation; behavioral responses; taxpayer mobility; tax evasion; Switzerland
JEL Codes: H24; H31; H73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wealth tax rate decrease (H29) | Reported wealth increase (D31) |
| Taxpayer mobility (H73) | Reported wealth increase (D31) |
| House price capitalization (R31) | Reported wealth increase (D31) |
| Changes in taxable financial assets of immobile taxpayers (F38) | Reported wealth increase (D31) |
| Wealth tax rate decrease (H29) | Taxpayer mobility increase (J62) |
| Wealth tax rate decrease (H29) | House price capitalization increase (R31) |
| Wealth tax rate decrease (H29) | Evasion increase (H26) |