Working Paper: CEPR ID: DP18620
Authors: David Agrawal; Dirk Foremny; Clara Martinez-Toledano
Abstract: We study the effects of decentralized wealth taxation on mobility and the effectiveness of tax coordination at mitigating tax competition. We exploit the reintroduction of the Spanish wealth tax, after which all regions except Madrid levied positive tax rates. We find the mobility responses to wealth taxes are within the range of prior estimates with respect to income taxes. However, wealth tax mobility responses generate losses to personal income tax revenues that are six times larger than the direct losses to wealth taxes. Madrid could achieve higher total regional revenues by agreeing to a harmonized positive tax rate.
Keywords: mobility; wealth taxes; fiscal decentralization; fiscal federalism; tax coordination
JEL Codes: E21; H24; H31; H73; J61; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Attracting high-wealth taxpayers (H26) | Wealth tax revenue losses (H26) |
| Wealth tax (H24) | Mobility responses in Madrid (J62) |
| Wealth tax (H24) | Mobility responses in other regions (J62) |
| Mobility responses (J62) | Population of wealthy individuals in Madrid (D31) |
| Mobility responses (J62) | Wealth tax revenue in Madrid (H29) |
| Mobility responses (J62) | Wealth tax revenue loss in other regions (H29) |
| Mobility responses (J62) | Personal income tax revenue loss in other regions (H29) |
| Net-of-tax rate on wealth (H24) | Mobility elasticity (J62) |
| Net-of-tax capital income tax rate (H24) | Mobility elasticity (J62) |
| Wealth tax (H24) | Mobility elasticity without covariates (J69) |