Discussion paper

DP12491 Do the rich pay their taxes early?

This paper examines the distributional e ects of interest credits from early
tax payments on average household income at the municipality level. The
hypothesis that households from high-income municipalities pay their income
taxes early is tested in a demand speci cation for interest credit for early tax
payments. The empirical analysis considers regional data from 170 munici-
palities in the canton of Zurich from 2007 to 2013. The income elasticity of
interest credit for early tax payments is estimated to be near unity for the
top 5th percentile of average household income, whereas the same elasticity is
below one-half for the lower 95th percentile and is statistically insigni cant.
The nding that high-income households pay their taxes early supports the
view that the rich are not liquidity constrained. Early tax payments make
the tax system more regressive for high-income households.


Fischer, A and L Zachmann (2017), ‘DP12491 Do the rich pay their taxes early?‘, CEPR Discussion Paper No. 12491. CEPR Press, Paris & London. https://cepr.org/publications/dp12491