Politicians Often Postpone Tax Increases to Directly after Elections

Tax increases in industrialized countries are often implemented directly after elections. This is a finding of a new study by the research network EconPol Europe. “Our findings show that politicians seem to postpone tax rate increases to the year after elections. We saw increases mainly in value added and sales tax (VAT) rates after elections – in other words, taxes that the majority of voters feel directly in their wallets,” says Niklas Potrafke, co-author of the study.

“Politicians know only too well that they have to be careful with tax increases, especially if they want to be re-elected. Moreover, voters have short memories, and when it comes time to vote again, many of them will barely remember the tax increase that followed the previous election,” Potrafke says. For this reason, governments hold back on tax increases immediately before elections, but do not reduce taxes significantly either.

The study introduces new quantitative harmonized indices of tax reforms based on qualitative information of about 900 Economic Surveys from the OECD and 37,000 tax-related news items from the IBFD archives. The new harmonized indices on reforms of tax rates and bases include granular subindices on six tax types.

Contact: Niklas Potrafke, 0049 / 89 / 9224 1319, Potrafke@ifo.de