infonet-economy

This paper examines the effects of household income on interest credits from early tax payments. The hypothesis that the richest households from high-income municipalities pay their income taxes early is tested in a demand specification for interest credit for early tax payments. The empirical analysis uses regional data from 170 municipalities in the canton of Zurich from 2007 to 2013. A one standard deviation increase in the ratio for household income between the mean and the 75th percentile increases the ratio of interest tax credit to total taxes by 5%. The finding that high-income households pay their taxes early supports the view that institutional arrangements supporting early tax payments make the (effective) tax system more regressive for high-income households.