Who Bears the Burden of Local Taxes?

We study the distributional effects of local taxes. Calibrating a structural model of heterogeneous households in a local labor market with plausibly causal elasticity estimates, we find that households with children have moderately stronger preferences for locally provided public goods and are considerably less mobile than households without children. Combined with capitalization of taxes into housing prices and non-homothetic housing demand, this implies that the incidence of local income taxes mainly falls on above-median income households without children. Property taxes turn out to be less progressive than local income taxes, even if income taxes are flat-rate.

with Jayson Danton, Raphaël Parchet and Jörg Schläpfer. See manuscript (revised March 2022)