Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 345: Why do you want lower taxes? Preferences regarding municipal income tax rates

Niklas Jakobsson ()
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Niklas Jakobsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: The factors shaping people’s preferences for municipal labour income tax rates in Sweden were assessed, using survey data. The tax rate actually faced by the respondents had explanatory power for their attitudes towards the tax rate only when a few socio-demographic explanatory variables were included. When a richer set of variables were included the association disappears. The hypothesis that this small or nonexistent effect from the actual tax rate is caused by a Tiebout bias finds no support, but IV-estimations indicate that the actual municipal tax rate may be of importance for the attitudes towards the tax rate. People with higher education, regularly reading a newspaper, agreeing with the political left, and stating that they were satisfied with the municipal services were less likely to want to decrease the municipal tax. People with low income, stated low knowledge about society, and agreeing with the political right were instead more likely wanting to decrease the municipal tax.

Keywords: tax preferences; attitudes; income tax

JEL-codes: H24

23 pages, February 23, 2009

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