Political Budget Cycle, Tax Collection, and Yardstick Competition

In: The B.E. journal of economic analysis & policy, Band 21, Heft 3, S. 1149-1161

Open Access

Abstract

Abstract
This paper exploits the political cycle of Italian municipalities to test for the presence of strategic interactions in the collection of local taxation. The revenue from the personal income tax surcharge—a tax tool of low salience—is (positively) plagued by political manipulation and is found to be a strategic complement, but only when mayors run for re-election, a finding consistent with the yardstick competition hypothesis. More salient fiscal tools, such as property tax and user fees and charges, are also (negatively) affected by budget cycles, but they do not appear to be spatially correlated.