Local taxes and economic voting: evidence from city ballot measures

Abstract Do voters punish local politicians for raising taxes? In California, proposed tax increases must be approved via local ballot measures. Using a regression discontinuity design that exploits the narrow passage of local tax initiatives, we find that incumbents do not generally suffer a penalty when cities raise taxes, with the notable exception of business taxes. We explore several mechanisms behind this result and uncover suggestive evidence that business interests may be particularly likely to mobilize following a tax increase. These results suggest that interest groups likely play an important role in determining whether new taxes generate voter backlash.