Federalism in Wonderland: on Fiscal Autonomy and the Property Transfer Tax
Mar 14, 2017: For many German Länder there is a strong fiscal incentive to increase the property transfer tax, as this not only generates higher tax revenues, but also gives them higher allocations when it comes to fiscal equalisation. If, however, Länder decide not to increase the property transfer rate, a paradoxical situation can arise in some cases. Every additional euro in property tax is linked to a decrease in allocations, which is greater than the increase in tax revenues. These are the findings of a recent Ifo Working Paper by Ifo reseach professor Thiess Büttner and Ifo researcher Manuela Krause.