Work

Behavioral Responses to Wealth Taxes: Evidence from Switzerland

Year: 2022

Type: article

Abstract: We study how declared wealth responds to changes in wealth tax rates. Exploiting rich intranational variation in Switzerland, we find a 1 percentage point drop in a canton’s wealth tax rate raises reported taxable wealth by at least 43 percent after 6 years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24 percent of the effect arises from taxpayer mobility and 21 percent from a concurrent rise in housing prices. 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. (JEL D91, H24, H26, H31)

Source: American Economic Journal Economic Policy

DOI: 10.1257/pol.20200258

Authors: Marius Brülhart, Jonathan Gruber, Matthias Krapf, Kurt Schmidheiny

Institutions: University of Lausanne, Massachusetts Institute of Technology, University of Basel

Language: English

Topic: Economic and Fiscal Studies

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: National Science Foundation, Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung

Awards: The Swiss Confederation: A Natural Laboratory for Research on Fiscal and Political Decentralization, Tax Competition and Tax Equalisation, The Elasticity of Taxable Wealth: Evidence from Switzerland