Discovering Tax Decentralization: Does it Impact on the Marginal Willingness to Pay Taxes? por José María Durán-Cabré, Alejandro Esteller-Moré, Luca Salvadori (2/2024).
Decentralized fiscal decision-making is expected to enhance welfare by promoting allocative efficiency gains and fostering greater political accountability. Within this institutional framework, it is anticipated that individuals would be willing to pay no less taxes in comparison to a centralized setting. This hypothesis is tested through an experiment utilizing survey data, leveraging the decentralization process that has transpired in Spain over the last 25 years. Individuals possess very limited knowledge about the layer of government to which they pay taxes, frequently assuming a centralized system. This holds true even in regions where tax decentralization is at its maximum, as observed in the so-called ‘foral regime’. Upon individuals ‘discovering decentralization’ (i.e., being informed that the corresponding tax is more decentralized than initially perceived), the Marginal Willingness to Pay Taxes experiences minimal changes, except for the Personal Income Tax. These findings raise questions about the purported benefits of tax decentralization.
