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Several studies have demonstrated the impact of political and institutional characteristics on communities' fiscal policies. Typically, these characteristics have been studied in isolation, and possible interactions with other political determinants have been ignored. Yet, fiscal policy decisions are subject to political and institutional forces contemporaneously. This study combines different models to explain the variation in the Flemish local income tax rate and the local property tax rate simultaneously. The results of the individual analyses are equated with those of the joint analysis, thereby concluding that isolated testing may suffer from specification bias. Adapted from the source document.

The article considers the main feature of the temporal effect of tax regulations. This feature is the combination of stability and volatility in legal regulations, where the first of these components (stability) has been consolidated at the level of the tax law principles. The article also examines the operation of the principles of stability and volatility through establishment of certain local taxes. It was concluded that tax legislation should be created and applied taking into account the principles stated in the legislation, including the principle of stability, which is designed to ensure a fair balance between public and private interests. Moreover, it has been argued that law-making process aimed at ensuring fiscal supplementation by ignoring the interests of taxpayers will never be justified, especially in the light of the practice of the European Court of Human Rights. According to the results of the research, it was found out that principle of stability, which is one of the special forms of the temporal effect of tax legislation, is characterized by the fact that in the event of non-compliance with the requirements established by the legislation regarding the deadlines for the amending of any elements of taxes and fees, the new tax rules are deprived of promising action, instead the effect of the rules of the previous edition, which has become invalid, extends to the new legal relationship. The conducted research gives grounds to assert about the existence of the established systemic inconsistency between norms of financial law institutions - tax and budget.

Standard tax competition models predict a 'race-to-the-bottom' of corporate tax rates when firms are mobile. Recent theoretical literature has qualified this view by offering a theoretical explanation why this extreme prediction need not occur: central regions with large clusters of economic activity are able to set positive tax rates without fearing to lose firms to peripheral regions as the firms would forego 'rents' from agglomeration economies. In this paper, we study whether local policy makers effectively tax such agglomeration rents. We test this with panel data from Swiss municipalities between 1985 and 2005. We find that large urban areas set indeed higher tax rates than small ones. This is consistent with the theoretical prediction. Within urban areas, however, municipal tax rates are unrelated to the size of economic activity in and around municipalities while they are positively related to the size of the political jurisdiction. We see this result as evidence that the standard tax competition model for asymmetric jurisdictions is at work in the competition of municipalities within an urban area. Both results are robust to controlling for reverse causality by using instrumental variables. Controlling for fixed effects in a 20 year panel is non-informative and neither supports nor contradicts these findings. As a robustness check we introduce an new measure of cluster intensity which considers the varying intensities in agglomeration economies across sectors.

In this paper, local government taxes on business in Britain and Germany are examined from the point of view of criteria for a 'good' local tax. The following criteria are evaluated: Ability to pay; support for national economic objectives (intranational allocation, international competition); distribution and stabilization; collection and compliance costs; local authority requirements of revenues, tax rates, stability, and response to growth; and interarea effects. Comparison of the two countries shows major deficiencies with both tax systems, as well as with many reform proposals. The recent British Green Paper is evaluated in particular and criticized for its divorce of accountability to businesses.

Local governments are given the authority to manage their regional finances independently. One area that provides the biggest contribution in Local Revenue is local tax. For that reason, the regional government, especially the city of Surakarta, seeks to increase tax revenue, one of which is by implementing an online-based local tax monitoring system on regional self-assessment taxes. The purpose of this study was to analyze the differences in regional tax revenue before and after the implementation of online-based local tax monitoring in the context of increasing Surakarta City's Original Regional Revenue. The data in this study are secondary and primary data, secondary data including realization data and hotel tax targets, restaurant tax, and parking tax during the period October 2016-September 2018 which amounted to 24 data obtained from BPPKAD Surakarta City and primary data obtained from the results interview at BPPKAD Surakarta City. The analysis technique used to analyze data is descriptive statistics, and willcoxon signed rank test, using SPSS (Statistical Product and Service Solutions) tools. The results showed that by using the Wilcoxon signed rank test there were differences in tax revenues on hotel taxes, restaurant taxes, and parking taxes before and after the implementation of this online-based regional tax monitoring, sequentially 0.004 0.05, 0.002 0.05, and 0.002 0.05. The implementation of monitoring went quite well, as evidenced by the potential for tax leaks to be minimized which would automatically have an impact in increasing the original revenue of the city of Surakrta.

Local governments are given the authority to manage their regional finances independently. One area that provides the biggest contribution in Local Revenue is local tax. For that reason, the regional government, especially the city of Surakarta, seeks to increase tax revenue, one of which is by implementing an online-based local tax monitoring system on regional self-assessment taxes. The purpose of this study was to analyze the differences in regional tax revenue before and after the implementation of online-based local tax monitoring in the context of increasing Surakarta City's Original Regional Revenue. The data in this study are secondary and primary data, secondary data including realization data and hotel tax targets, restaurant tax, and parking tax during the period October 2016-September 2018 which amounted to 24 data obtained from BPPKAD Surakarta City and primary data obtained from the results interview at BPPKAD Surakarta City. The analysis technique used to analyze data is descriptive statistics, and willcoxon signed rank test, using SPSS (Statistical Product and Service Solutions) tools. The results showed that by using the Wilcoxon signed rank test there were differences in tax revenues on hotel taxes, restaurant taxes, and parking taxes before and after the implementation of this online-based regional tax monitoring, sequentially 0.004 0.05, 0.002 0.05, and 0.002 0.05. The implementation of monitoring went quite well, as evidenced by the potential for tax leaks to be minimized which would automatically have an impact in increasing the original revenue of the city of Surakrta.

Several studies have demonstrated the impact of political and institutional characteristics on communities' fiscal policies. Typically, these characteristics have been studied in isolation, and possible interactions with other political determinants have been ignored. Yet, fiscal policy decisions are subject to political and institutional forces contemporaneously. This study combines different models to explain the variation in the Flemish local income tax rate and the local property tax rate simultaneously. The results of the individual analyses are equated with those of the joint analysis, thereby concluding that isolated testing may suffer from specification bias.

Adam N. Michel


In 2017, Republicans passed the Tax Cuts and Jobs Act, which cut taxes for the vast majority of Americans and simplified taxpaying by making modest reforms to, among other things, the system of itemized deductions. One of the most politically contentious reforms was a new $10,000 cap on the state and local tax (SALT) deduction. This revenue‐​raising change was critical in offsetting the cost of the individual tax cuts, and without it, extending the tax cuts will be next to impossible.
Politicians representing high‐​income congressional districts in high‐​tax states, such as California, New York, and Illinois, have since campaigned on repealing the SALT cap. This same group of legislators is threatening to derail the Republican's new economic tax package because it does not increase or eliminate the SALT cap. Democrats dealt with a similar dynamic on major legislation last year.
As the 2025 expiration of the 2017 tax cuts draws closer, members of Congress need to remember that a simpler tax code with lower tax rates must also limit or repeal special interest provisions, such as the SALT deduction. It's much harder to cut tax rates without broadening the tax base.
Below is a refresher on why the costs of the SALT cap are overstated and why the cap is good policy in its own right.
Does the Cap Hurt?
Estimates show that more than 95 percent of taxpayers benefited from a tax cut in 2018 or saw no change in their tax bill. This leaves a small minority of taxpayers who could have seen tax increases. Higher taxes for some is a predictable outcome of any reform that attempts to limit special interest tax provisions that provide large benefits to a few taxpayers at the expense of others.
However, the problem of higher taxes due to the SALT cap is often overstated. In the hardest‐​hit congressional districts in New York and California, with the largest share of taxpayers with estimated tax increases, 88 percent of taxpayers benefited from a tax cut or saw no change.
So why the disconnect? Even higher‐​income taxpayers who face the new SALT limit likely saw a tax cut for three reasons.
First, the tax law doubled the standard deduction, so many people who previously itemized their taxes now take the larger standard deduction instead.
Second, tax rates were lowered for people at all income levels. The SALT cap increased some people's taxable income, but lower tax rates mean most people still come out paying less in total taxes.
Third, the 2017 law raised the exemption for the alternative minimum tax (AMT), which denied 5 million higher‐​income AMT‐​paying taxpayers any SALT deduction. The AMT is a parallel tax system that generally applies to taxpayers with large deductions and certain types of income, requiring them to calculate their taxes twice and pay whichever tax is higher. For these taxpayers, the SALT deduction increased from zero to $10,000.
Why Cap SALT?
The SALT cap and other limits on itemized deductions make tax cuts possible, simplify taxpaying, and reduce subsidies for high‐​income taxpayers and state governments.
Capping the SALT deduction is a crucial ingredient in the classic tax reform recipe of lower tax rates, offset with a broader tax base. The $10,000 SALT cap and other limits on itemized deductions raised $668 billion over ten years, one of the largest individual tax changes used to pay for lower tax rates.
Without the SALT cap and other revenue‐​raising components of the 2017 compromise, the old tax rules will snap back in 2026, bringing back the old AMT, higher marginal tax rates, and smaller standard deduction. This is the counterfactual; it is not an option to eliminate the SALT cap in isolation. Without limits on itemized deductions, the rest of the tax cuts are unsustainable. Full SALT deduction for higher tax rates is a bad trade for almost all taxpayers—even those in high‐​income coastal states.
The SALT cap also simplified taxpaying. The tax code offers taxpayers the choice of taking a flat standard deduction ($27,700 for a family in 2023) or the sum of a list of itemized deductions for specific expenses, including mortgage interest, state and local taxes, and charitable giving. In 2017, 30 percent of taxpayers used the more complicated itemized system. After Congress capped the SALT deduction, curtailed other itemized deductions, and doubled the standard deduction, 9.5 percent of taxpayers itemized their taxes. By one estimate, this saves taxpayers about 100 million hours of time that they would have spent filing their more complicated tax returns.
In addition to simplifying and cutting taxes, capping the SALT deduction was a good governance reform. The SALT deduction is a subsidy for high‐​income taxpayers in high‐​tax states, paid for by the rest of Americans. It created perverse incentives that limited the cost to states for increasing their taxes because higher‐​income taxpayers could write off the tax on their federal return. As I've written elsewhere, before the 2017 cap, "the average millionaire living in New York or California deducted more than $450,000 worth of SALT; the average millionaire in Texas deducted only $50,000 and therefore paid close to $180,000 more per year in federal taxes."
With an uncapped SALT deduction, middle‐​class taxpayers are forced to subsidize millionaires who could use the SALT deduction to write off hundreds of thousands of dollars from their federal taxes. Without the cap, taxpayers with identical incomes pay different amounts in federal taxes based entirely on their state of residency.
The new federal tax code cut taxes for most taxpayers and flipped the incentives for state governments so that inefficiently high state taxes are no longer subsidized by taxpayers in more responsible locals.
A Path Forward
The SALT deduction is still distorting tax policy even in its limited form. For example, the poorly conceived temporary $4,000 bonus deduction proposed in the Tax Cuts for Working Families Act, part of the Republican economic tax package, is the result of SALT politics. The proposal attempts to give additional tax relief to taxpayers concerned by the SALT cap.
As initially proposed by House Republicans in the lead‐​up to 2017, the correct policy is to repeal the SALT deduction entirely. The $10,000 cap was a political compromise necessary to get enough votes for the bill. Raising or lifting the cap significantly reduces revenue, making it harder to extend or expand the tax cuts when they expire at the end of 2025.

This book discusses the concepts, types, models, and patterns of Japan's Hometown Tax Donation Payment system, to provide a clear picture of this newly developed unique and innovative fund-raising tool used by municipalities. It also sheds light on the influences that reciprocal gifts provided by each municipality to donors have on local economies by reviewing empirical works and surveys targeting local business owners and local financial institutions. A distinguishing feature of the book is that it introduces a new social finance mechanism that is unique to the Japanese market and could provide policy implications for small and medium-sized enterprises (SMEs) as well as regional development. Furthermore, the book explores the efficacy of the demand–pull approach to support-strengthening SMEs, especially in rural areas. Finally, the book identifies some lessons learned from the system with a view toward advancing research on this phenomenon and making the system efficient and sustainable. As a whole, the book can provide ample benefits to novices, academics, researchers, and policymakers interested in Hometown Tax Donation Payment, an innovative social finance tool. This is an open access book.

Validly due and payable state and local taxes often go unpaid because the absent tax debtor chooses not to pay voluntarily and has no assets from which the tax debt can be collected in the taxing state. He often has assets elsewhere, but they may be difficult for the tax creditor to discover and to reach. Only a few years ago out-of-state assets could not be reached at all, nor could the tax debtor himself be reached except within the taxing state, in its own courts, and by its own legal processes. Formerly, no state would use its law or its courts to enforce the penal or the revenue laws of another state. As to claims based upon penal laws, this inhospitality to some extent still persists, although the definition of penality for that purpose is being narrowed.' With respect to claims based upon revenue laws, however, the legal attitude has changed. As is often the case, this change was initiated by a few thoughtful common law courts and then was taken up by the state legislatures. Today it is generally possible for a state or its subordinate units to maintain tax collection actions in most of the sister states. Yet such revenue collecting lawsuits seldom are brought and are not always successful when brought. Attempted evasion of tax obligations is no small matter, and movement from state to state affords a large part of the opportunity for it. Sales and use taxes normally are collected from sellers of goods, and an in-state seller can be investigated with reasonable thoroughness. Such an investigation often is not possible with out-of-state sellers, and it is probable that large amounts of use taxes are never collected from them.' Income taxes can be evaded by nonresidents who earn income in a state then remove themselves and the income before taxes can be collected, and also by residents who move from the state before tax collection. Moreover, withholding can reach only a portion of these absentees. Death taxes provide another of several examples of levies that can be minimized through interstate slippage. ...

Standard tax competition models predict a "race-to-the-bottom" of corporate tax rates when firms are mobile. Recent theoretical literature has qualified this view by offering a theoretical explanation why this extreme prediction need not occur: central regions with large clusters of economic activity are able to set positive tax rates without fearing to lose firms to peripheral regions as the firms would forego "rents" from agglomeration economies. In this paper, we study whether local policy makers effectively tax such agglomeration rents. We test this with panel data from Swiss municipalities between 1985 and 2005. We find that large urban areas set indeed higher tax rates than small ones. This is consistent with the theoretical prediction. Within urban areas, however, municipal tax rates are unrelated to the size of economic activity in and around municipalities while they are positively related to the size of the political jurisdiction. We see this result as evidence that the standard tax competition model for asymmetric jurisdictions is at work in the competition of municipalities within an urban area. Both results are robust to controlling for reverse causality by using instrumental variables. Controlling for fixed effects in a 20 year panel is non-informative and neither supports nor contradicts these findings. As a robustness check we introduce an new measure of cluster intensity which considers the varying intensities in agglomeration economies across sectors.