Tax limits and local elections

This paper exploits variation in tax limits across over 7,000 Italian municipalities during the 2000s to investigate their impact on voter turnout and local election outcomes. The empirical analysis is based on a panel data estimator on about 14,000 municipal elections during the 2001-2010 decade and on a quasi-experimental approach focusing on the fiscal limitation treatment of municipalities (local income surcharge freeze) in the years 2001 and 2006, where the trajectory of local turnout in the concurrent general elections is used as the counterfactual. The evidence suggests that tax limits provoke: a) a modest fall in voter turnout in mayoral elections; b) a mild decrease in the number of mayoral candidates; c) a sizeable widening of elected mayors’ win margins and some improvement in mayors’ valence proxies. The evidence is compatible with the hypothesis that the imposition of tax limits lowers the ideological stakes of local elections, favors party-line crossing, and promotes vote convergence based on the valence of candidates.