Discussion paper

DP15826 Who Bears the Burden of Local Taxes?

We study the incidence of local taxes on the welfare of heterogeneous residents. A structural model of imperfectly mobile households who differ in terms of family status and income allows us to back out local public-good preferences and household mobility. We calibrate the model with plausibly causal tax-base and housing-price elasticity estimates, based on municipality-level data for Switzerland. We find that households with children have stronger preferences for locally provided public goods and are less mobile than households without children. Combined with capitalization of taxes into housing prices and non-homothetic housing demand, this implies that the burden of local income
taxes is mainly borne by above-median income households without children. Even absent a graduated rate schedule, the incidence of local income taxes is found to be more progressive than that of local property taxes.


Brülhart, M, J Danton, R Parchet and J Schläpfer (2022), ‘DP15826 Who Bears the Burden of Local Taxes?‘, CEPR Discussion Paper No. 15826. CEPR Press, Paris & London. https://cepr.org/publications/dp15826