Tax Thy Neighbor:
How Native Italian Mayors Increase Fiscal Extraction
How do local tax politics change when the mayor is a long-standing member of the community? Leveraging their personal knowledge of the tax base and greater trust by the local community, socially-embedded local elected officials are better able to increase state fiscal extraction. Through a close-election discontinuity design, a novel survey, and text analysis of local manifestos, this study documents how Italian mayors native to the town increase tax enforcement, rates and raise more revenue. These results have important implications, as decentralization policies across countries have granted substantial fiscal autonomy to local governments. Going down the state echelons, however, elected officials are often deeply embedded in the community they govern, which has deep implications for fiscal governance.
