The State Capacity Ceiling on Tax Rates: Randomized Property-Tax Abatements in the DRC (Bergeron, Tourek & Weigel, 2024)

Summary

"The State Capacity Ceiling on Tax Rates: Evidence From Randomized Tax Abatements in the DRC," by Augustin Bergeron (University of Southern California), Gabriel Tourek (University of Pittsburgh), and Jonathan Weigel (UC Berkeley), was published in Econometrica in 2024 (DOI 10.3982/ecta19959; an earlier version circulated as NBER Working Paper 31685). The study "investigates how tax rates and tax enforcement jointly impact fiscal capacity in low-income countries," and is, to the authors' knowledge, the first field experiment to randomize tax rates themselves. It was embedded in the 2018 property-tax campaign of the city of Kananga, in the DRC's Kasaï-Central province — one of the poorest settings in the world.

The Experiment and Findings

The Provincial Government "randomly assigned 38,028 property owners to the status quo tax rate or to a rate reduction," and layered on two enforcement treatments (randomized enforcement messages on tax notices and random assignment of collectors).

• The status quo rate was above the revenue-maximizing rate. "This variation in tax liabilities reveals that the status quo rate lies above the revenue-maximizing tax rate (RMTR)," and "reducing rates by about one-third would maximize government revenue by increasing tax compliance."
• Enforcement lifts the ceiling. "We then exploit two sources of variation in enforcement... to show that the RMTR increases with enforcement." Adding an enforcement message, or upgrading the weakest collectors, "would raise the RMTR by about 40%."
• Rates and enforcement are complementary. "Tax rates and enforcement are thus complementary levers," and "jointly optimizing tax rates and enforcement would lead to 10% higher revenue gains than optimizing them independently."
• The headline lesson. The findings "provide experimental evidence that low government enforcement capacity sets a binding ceiling on the revenue-maximizing tax rate in some developing countries, thereby demonstrating the value of increasing tax rates in tandem with enforcement to expand fiscal capacity."

Relation to the Georgist Case

The paper is the strongest experimental complement to Brockmeyer et al.'s Mexico evidence on the higher-property-tax-rates-raise-welfare-in-developing-countries outcome: it is causal (indeed randomized), from a second country, and it targets exactly the policy variable in question — the property-tax rate. It supports the broad claim that recurrent property taxation is a valuable, underused fiscal-capacity tool in poor states. But it materially sharpens the nuance: raising rates is not a free lever. Where enforcement capacity is very weak, rate increases beyond the ceiling are self-defeating because they trigger non-compliance — the same tension Brockmeyer flagged (rate increases help; coercive enforcement can hurt). The welfare reading is one step removed from the paper, which measures revenue and compliance rather than a household-welfare outcome directly.

Bears On

• Benefit (supports, with caveat): Higher property-tax rates raise welfare in developing countries — adds randomized second-country evidence on property-tax rates and a state-capacity ceiling caveat.
• Research: Brockmeyer et al., Taxing Property in Developing Countries — the Mexico companion causal study.
• Objection: Land value can't be assessed accurately — the enforcement/administration constraint the ceiling reflects.

See Also

• Higher property-tax rates raise welfare in developing countries
• Brockmeyer et al., Taxing Property in Developing Countries
• Property Tax in Africa (Franzsen & McCluskey)
• IMF, Building Tax Capacity for Growth and Development

Sources

1. Augustin Bergeron, Gabriel Tourek & Jonathan Weigel (2024), "The State Capacity Ceiling on Tax Rates: Evidence From Randomized Tax Abatements in the DRC," Econometrica 92(4). DOI: 10.3982/ecta19959; working-paper version NBER WP 31685 — abstract fetched and quoted verbatim — used for the randomized design over 38,028 property owners in Kananga (Kasaï-Central, DRC, 2018 campaign), the status-quo-above-RMTR and "reducing rates by about one-third" findings, the enforcement-raises-RMTR-by-40% result, the complementary-levers and 10%-higher-joint-gains findings, and the state-capacity-ceiling conclusion.