This project aims at studying the effects of the real estate transfer tax in Germany on the municipalities' budgets. In 2006, the reform of fiscal federalism shifted the tax-setting authority over the real estate transfer tax from the federal level to the state level. Since then, most states have increased the tax rate from 3.5% to between 4.5 and 6.5%. This project analyzes whether the real estate transfer tax, which is the most important state tax, has negative effects on the revenues of the municipalities. Households and firms might move away their property acquisitions from states with a high real estate transfer tax rate to states with a lower tax rate. The high-tax state might lose business tax revenues through spending arising due to property acquisitions as well as property tax revenues through the construction of new buildings. This project is the first to study the effects of the real estate transfer tax on tax revenues of municipalities and is of substantial importance for the ongoing debate about balanced budgets. The analysis will be carried out using a spatial regression discontinuity design at the state borders.