Two Free DP Downloads 17 October 2019 - REPORTED WEALTH HOLDINGS ARE HIGHLY SENSITIVE TO WEALTH TAXATION: Evidence from Switzerland and VOTES FOR ANTI-EUROPEAN UNION PARTIES: New evidence of the main causes

Thursday, October 17, 2019

BEHAVIORAL RESPONSES TO WEALTH TAXES: Evidence from Switzerland 
Marius Brülhart, Jonathan Gruber, Matthias Krapf, Kurt Schmidheiny   
CEPR DP No. 14054 | 10 October 2019

The growth of wealth inequality in many countries has led to a renewed focus on redistributive taxation. In particular, there is much discussion of expanding the package of redistributive tax tools to include an annual wealth tax, a concept that had largely been abandoned by many OECD countries. 

A new CEPR study by Marius Brülhart, Jonathan Gruber, Matthias Krapf and Kurt Schmidheiny analyses how reported wealth responds to changes in wealth tax rates using rich intra-national variation in Switzerland, the country with the highest revenue share of annual wealth taxation in the OECD. 

The study finds that reported wealth holdings are highly sensitive to wealth taxation: a 1% point drop in the wealth tax rate raises reported wealth by at least 43% after six years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arises from taxpayer mobility and 20% from house price capitalisation. 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.

Table 1: Wealth taxes in OECD countries.

Notes: In % of total tax revenue; only OECD countries that had non-zero wealth taxes in 1995; source: OECD Global Revenue Statistics (code 4210, Individual Recurrent Taxes on Net Wealth). In 2018, France replaced its wealth tax with a real estate tax, and Belgium introduced a tax on certain types of financial wealth. 


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THE GEOGRAPHY OF EU DISCONTENT 
Lewis Dijkstra, Hugo Poelman, Andrés Rodríguez-Pose   
CEPR DP No. 14040 | 07 October 2019

Anti-EU votes are mainly driven by a combination of long-term economic and industrial decline, low levels of education and a lack of local employment opportunities. Once these factors are taken into account, well-off places are more likely to vote for anti-EU parties than places that are worse off, in contrast to explanations linking anti-establishment voting with poor people living in poor places.

Other factors that have featured prominently as potential drivers of populism – such as ageing, rurality, remoteness, employment decline and population decline – seem to matter much less or matter in different ways (depending on the strength of opposition to EU integration considered).

These are the central findings of a new CEPR study by Lewis Dijkstra, Hugo Poelman and Andrés Rodríguez-Pose, which provides the first comprehensive overview of EU discontent across more than 63,000 electoral districts in the EU-28 and assesses which factors push anti-EU voting. 

They note that support for parties opposed to EU integration has risen rapidly and a wave of discontent has taken over the EU. This discontent is purportedly driven by the very factors behind the surge of populism: differences in age, wealth, education, or economic and demographic trajectories. Among the findings of the new research: 

  • The vote for parties that are strongly opposed to EU integration grew from 10% to 18% between 2000 and 2018. 
  • Southern Denmark, Northern Italy, Southern Austria, Eastern Germany, Eastern Hungary, and Southern Portugal are hotspots of anti-EU voting. 
  • Rural areas and small towns are more Eurosceptic than bigger cities. 
  • Votes for parties strongly opposed to European integration are virtually non-existent in Spain, the Baltics, Poland, Slovenia, Croatia, Romania, Belgium and Ireland.
  • The geography of votes for parties moderately opposed to European integration almost fully encompasses the whole of Greece, Hungary and Italy
  • More than one fifth of the electorate in large swathes of the Czech Republic, the Netherlands, France, Austria, southern Denmark and Slovakia voted for anti-EU parties.
  • Populist and anti-system parties do not necessarily advocate the abolition of or a withdrawal from the EU, but they blame many real or perceived ills on European integration.

Figure 1: Share of vote for parties somewhat opposed, opposed, or strongly opposed to European integration (2013-2018)

 

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