DP12491 | Do the rich pay their taxes early?

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This paper examines the distributional e ects of interest credits from early tax payments on average household income at the municipality level. The hypothesis that households from high-income municipalities pay their income taxes early is tested in a demand speci cation for interest credit for early tax payments. The empirical analysis considers regional data from 170 munici- palities in the canton of Zurich from 2007 to 2013. The income elasticity of interest credit for early tax payments is estimated to be near unity for the top 5th percentile of average household income, whereas the same elasticity is below one-half for the lower 95th percentile and is statistically insigni cant. The nding that high-income households pay their taxes early supports the view that the rich are not liquidity constrained. Early tax payments make the tax system more regressive for high-income households.