This project studies how municipal tax reforms affect the local economy and how different reform motives influence both the implementation and the impact of these reforms. It is based on new narrative data from local political debates, which reveal the motives behind tax reforms, such as fairness, efficiency, or local tax competition.

Germany’s federal system provides ideal conditions for this analysis as municipalities have considerable leeway in shaping their tax policy with local councils carrying the tax reforms based on voting results within the council. The study uses this framework to compare actual reforms with similar reform proposals that narrowly failed in other municipalities, allowing for a causal identification of the local economic impacts of tax reforms.

In addition, the analysis of narratives offers insights into how local politicians perceive their city in relation to others, for instance, whether they see themselves as competing with neighboring or more distant cities. This helps to model tax competition in a more realistic way.

Finally, the project studies how political arguments and local majorities shape municipal tax policy. It thus contributes to a better understanding of tax reforms that are both politically feasible and economically sound at the local level.