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on Public Economics |
| By: | James Alm (Tulane University); Kay Blaufus (University of Hanover); Martin Fochmann (Free University of Berlin); Erich Kirchler (University of Vienna); Peter N. C. Mohr (Free University of Berlin); Nina E. Olson (Center for Taxpayer Rights); Benno Torgler (Queensland University of Technology) |
| Abstract: | Governments have taken remarkable measures during the SARS-CoV-2 pandemic in their efforts to safeguard citizens’ health and the economy. As a consequence, public debts have reached unprecedented levels, which will require at some point higher taxes. Ensuring that citizens pay these taxes requires consideration of the many factors that will likely affect their tax compliance decisions. In this paper, we reflect from a behavioral economic perspective the impact of tax policy measures on the perception, evaluation, and behavior of citizens and derive considerations to devise appropriate tax policies to ensure compliance in the future. We start with speculations about citizens’ views of governmental restrictions and economic stimulus measures in response to the crisis, we apply these speculations to the acceptance and perceived effectiveness of policy measures on citizens’ tax compliance behaviors, and we finish with their likely impact on determinants of tax compliance. Building on the derived insights, we deduce a set of considerations to improve tax compliance – and to generate the necessary tax revenues to deal with the after-effects of SARS-CoV-2 when the pandemic is under control: communication, transparency and justification of measures, access to support, service provision, audits and penalties in case of free-riding, targeted audits, building social norms of cooperation, consideration of framing effects, development of plans and strategies for the future, and anticipation of hindsight biases. |
| Keywords: | Covid-19 crisis; Tax compliance; Tehavioral economics; Behavioral taxation |
| JEL: | H12 H20 H26 D91 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2102&r=all |
| By: | Scott R. Baker (Northwestern University, Kellogg School of Management, Department of Finance); Pawel Janas (Kellogg School of Management - Department of Finance); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management) |
| Abstract: | We develop a comprehensive dataset of state and local taxes from 2000-2015 that includes personal income taxes, property taxes, corporate income taxes, sales taxes, estate taxes and excise taxes. We illustrate how state and local taxes have changed over time, in response to business cycles, and to what extent different taxes co-move within a state or locality. Across states and local jurisdictions, large differences in the mix of taxes are observed, and these differences have tended to become more pronounced over time. Moreover, we note that different types of taxes tend to co-move within a state or local jurisdiction, highlighting the importance for researches to take into account the entirety of the tax system, rather than just a single tax type, when examining household or firm responses to state and local tax changes. At both a state and local level, increases in tax rates of all types tend to increase tax revenue but worsen business conditions and employment. |
| Keywords: | Local taxes, state taxes, income tax, corporate income tax, sales tax, property tax |
| JEL: | H20 H71 H72 H77 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp20115&r=all |
| By: | Hansson, Åsa (Department of Economics, Lund University, and) |
| Abstract: | Thirty years ago, the Swedish tax system underwent a major reform. Since then there have been many changes to the tax system, and the general level of tax revenues has declined by over five percentage points of GDP. The decline in total revenues does not necessarily translate into an evenly distributed decline for taxpayers. This paper studies how tax payments have changed in Sweden since the major tax reform over income distribution, sex, age, and geographical location. The results show that individuals at the bottom and very top of the income distribution have benefited disproportionally more from lower taxes. Labor tax payments as share of labor income have increased across the income distribution and particularity so for middle- and high-income earners. |
| Keywords: | Tax burden; Tax distribution; Tax reform |
| JEL: | D63 H23 H24 |
| Date: | 2020–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1375&r=all |
| By: | Gudgeon, Matthew (United States Military Academy); Trenkle, Simon (IZA) |
| Abstract: | This paper studies the speed at which workers' pre-tax earnings respond to tax changes along the intensive margin. We do so in the context of Germany, where a large discontinuity — or notch — in the tax schedule induces sharp bunching in the earnings distribution. We analyze earnings responses to two policy reforms that shift this notch outward. In a frictionless world, the workers that made up the excess mass at the old notch should all increase their earnings. While some of these workers indeed adjust their earnings rapidly, over 38% do not, and instead take several years to adjust. We propose that heterogeneity in firm labor demand plays a key role in generating the observed differences in the speed of workers' earnings responses and predict that adjustment will be quickest at growing firms. We test and find support for these demand-side effects in our linked employer-employee data. |
| Keywords: | labor supply responses to taxation, earnings adjustment frictions, labor demand |
| JEL: | H24 H31 J22 J23 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13931&r=all |
| By: | José Ignacio Garcia-Pérez (Department of Economics, Universidad Pablo de Olavide & FEDEA;); Manuel Serrano-Alarcón (NOVA National School of Public Health, NOVA University of Lisbon Center for Research in Economics and Health, Universitat Pompeu Fabra;); Judit Vall Castelló (Department of Economics, Universitat de Barcelona & Institut D’economia De Barcelona (IEB), Center for Research in Economics and Health, Universitat Pompeu Fabra;) |
| Abstract: | We estimate the labour market and health effects of a long-term unemployment (LTU) subsidy targeted to middle aged disadvantaged workers. In order to do so, we exploit a Spanish reform introduced in July 2012 that increased the age eligibility threshold to receive the subsidy from 52 to 55. Using a within-cohort identification strategy, we show that men ineligible for the subsidy were more likely to leave the labour force. In terms of health outcomes, although we do not report impacts on hospitalizations when considering the whole sample, we do find significant results when we separate the analysis by main diagnosis and gender. More specifically, we show a reduction by 12.9% in hospitalizations due to injuries as well as a drop by 2 percentage points in the probability of a mental health diagnosis for men who were eligible for the LTU subsidy. Our results highlight the role of long-term unemployment benefits as a protecting device for the health (both physical and mental) of middle aged, low educated men who are in a disadvantaged position in the labour market. |
| Keywords: | disadvantaged workers, unemployment subsidies, health effects |
| JEL: | H52 I23 I28 J24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:20.11&r=all |
| By: | Ritzen, Jozef M. (UNU-MERIT, Maastricht University) |
| Abstract: | In 2021 lockdowns still will be necessary to keep COVID-19 in check world-wide. Vaccination might bring sufficient coverage by the end of 2021 for some countries. Priorities in the re-emergence of economies should be for sustainability, health, education, full employment and social cohesion to preserve long-term welfare. Pressures on Government budgets are going to rise in view of the unprecedented high public debt to GDP ratio world-wide. Increased taxation of wealth and of the top 10%-income-group is a superior strategy compared to retrenchment (budget cuts in health, education and social expenditures). International cooperation is top priority. This applies to health, but also to economic and monetary policy: it can lift economic growth in the G20 countries over the short and long run by at least one third. The resumption of trade should be guided by rewarding the achievement of social goals and realizing sustainability. In this way the level playing field is restored for those countries which want to contribute to a sustainable world and to cooperation. International taxation rules for profits should prevent tax havens to make this a negative sum game. This would give developing countries some of the necessary breathing space to re-emerge from the COVID-19 crisis. |
| Keywords: | COVID-19, employment, economic development, environmental sustainability, social cohesion, education, health, monetary policy, long-term interest rates, conditionalities, taxation, stock market |
| JEL: | I00 J20 H63 H74 O38 O40 O43 O44 E62 E43 Q58 F18 F23 O52 R30 I25 F30 G15 H25 H87 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2020057&r=all |
| By: | James Alm (Tulane University) |
| Abstract: | Ensuring compliance with the tax laws is an enduring challenge for all governments. However, the methods by which governments enforce the tax laws, and by which individuals and firms evade their taxes, change over time, due at least in part to changing technology. In this paper I examine how changing technology, especially changes driven by the transformation of information into digital formats for use by computers, seems likely to affect tax evasion in the years ahead. I argue that many of these changes in technology will improve the ability of governments to decrease tax evasion, mainly by increasing the flow of information to governments. However, I also argue that these changes in technology will open up new avenues by which some individuals and some firms can evade (and avoid) taxes. At this point it is unclear which trend will dominate, so that the effects of technology on the overall level of tax evasion is uncertain. Even so, I believe that the distributional effects of these technological changes are more predictable, given the differential effects of technology on the abilities of individuals of different levels and types of income to evade their taxes. Indeed, I argue that changing technology will make evasion increasingly difficult for most taxpayers, especially those subject to employer withholding and third party information reporting, but that evasion will be increasingly viable for a small number of taxpayers, especially very high income taxpayers. Regardless of the overall impact of technology on the level of tax evasion, I conclude that the effects of technology will likely increase economic inequality. |
| Keywords: | Tax evasion; Inequality; Technology; Digitalization |
| JEL: | H26 H22 D03 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2101&r=all |
| By: | Maggie R. Jones; Emilia Simeonova; Randall Akee |
| Abstract: | We study how the largest federal tax-based policy intended to promote work and increase incomes among the poor—the Earned Income Tax Credit (EITC)—affects the socioeconomic standing of children who grew up in households affected by the policy. Using the universe of tax filer records for children linked to their parents, matched with demographic and household information from the decennial Census and American Community Survey data, we exploit exogenous differences by children’s ages in the births and “aging out” of siblings to assess the effect of EITC generosity on child outcomes. We focus on assessing mobility in the child income distribution, conditional on the parents’ position in the parental income distribution. Our findings suggest significant and mostly positive effects of more generous EITC refunds on the next generation that vary substantially depending on the child’s household type (single-mother or married family) and by the child’s gender. All children except White children from single-mother households experience increases in cohort-specific income rank, own family income, and the probability of working at ages 25–26 in response to greater EITC generosity. Children from married households show a considerably stronger response on these measures than do children from single-mother households. Because of the concentration of family types within race groups, the more positive response among children from married households suggests the EITC might lead to higher within-generation racial income inequality. Finally, we examine how the impact of EITC generosity varies by the age at which children are exposed to higher benefits. These results suggest that children who first receive the more generous two-child treatment at later ages have a stronger positive response in terms of rank and family income than children exposed at younger ages. |
| Keywords: | Earned Income Tax Credit, Intergenerational Mobility, Administrative Data, Census, Earnings. |
| JEL: | H24 I38 J62 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:20-35&r=all |
| By: | Hania Kronfol; Victor Steenbergen |
| Keywords: | Public Sector Development - Public Sector Economics Law and Development - Tax Law Macroeconomics and Economic Growth - Investment and Investment Climate Macroeconomics and Economic Growth - Taxation & Subsidies Public Sector Development - Tax Policy |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33433&r=all |