New Thinking in Political Economy series
Edited by José Casas Pardo and Pedro Schwartz
Chapter 18: (When) Do Tax Increases Cause Electoral Damage? The Case of Local Property Taxes in Spain
Núria Bosch Roca and Albert Solé-Ollé 1 INTRODUCTION Conventional wisdom among journalists and politicians is that tax increases have electoral consequences and, when races are close, they may even break an incumbent’s re-election bid. The electoral costs of taxation are expected to be even higher at the local level, since the perceived unfairness and the high level of visibility of some local taxes means that voters may be really aware of the money taken from their pockets by the local council and ready to vote against a tax increase (Stults and Winters, 2002). These are indeed traits often attributed to the property tax, which is the tax analysed in this chapter. For example, it is often argued that this tax is the most unfair (Gallup Poll, 4–7 April 2005). There are two main reasons for this perceived unfairness. First, the tax is not tied to a realized stream of money but rather to paper gains, and second, its increases are usually sudden and dramatic as a result of reassessments in periods of rapidly rising housing markets. The property tax is also highly visible, since ‘it is assessed on what is typically the household’s biggest consumption and investment item’ (Wassmer, 1993, p. 135). Given these unattractive traits it is not strange that public discontent with property taxes has led both to tax revolts and electoral defeats. Nevertheless, there is lower consensus among the scholars regarding the electoral costs of taxation, in general, and of local property taxes, in...
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