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on Public Economics |
| By: | Bastani, Spencer (Uppsala University); Waldenström, Daniel (Research Institute of Industrial Economics, Stockholm) |
| Abstract: | This paper examines the implications of Artificial Intelligence (AI) and automation for the taxation of labor and capital in advanced economies. It synthesizes empirical evidence on worker displacement, productivity, and income inequality, as well as theoretical frameworks for optimal taxation. Implications for tax policy are discussed, focusing on the level of capital taxes and the progressivity of labor taxes. While there may be a need to adjust the level of capital taxes and the structure of labor income taxation, there are potential drawbacks of overly progressive taxation and universal basic income schemes that could undermine work incentives, economic growth, and long-term household welfare. Some of the challenges posed by AI and automation may also be better addressed through regulatory measures rather than tax policy. |
| Keywords: | AI, automation, inequality, labor share, optimal taxation, tax progressivity |
| JEL: | H21 H30 O33 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izapps:pp212 |
| By: | Scott R. Baker; Pawel Janas; Lorenz Kueng |
| Abstract: | Empirical research in public economics, including our own, often uses variation in state and local taxes as an empirical laboratory to estimate causal relationships. A key concern is that other taxes might change at the same time. To assess this concern, we develop a dataset of state (1977–2022) and local (2000–2022) tax rates and revenue from personal income, corporate income, property, sales, and excise taxes. This new dataset generates two key results. First, we find that taxes of different types tend to co-move within a jurisdiction: a tax change of one type can more than double the likelihood of a second tax type changing in the same year. Local tax changes also co-move with tax changes enacted by the state they are located in. This positive correlation can upwardly bias elasticity estimates, but only moderately. For example, regressing state economic outcomes on the full set of state tax changes yields elasticities that are about 10–30% smaller than those obtained from using a single tax type in isolation. Second, we document that the mix of taxes across state and local jurisdictions is very different, and that these differences have become more pronounced over time as jurisdictions have increasingly become reliant on the single tax type—sales, personal or corporate income tax—that was most prominent for them in the earliest part of our sample. |
| JEL: | H20 H71 H72 H77 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32786 |
| By: | David R. Agrawal; Iuliia Shybalkina |
| Abstract: | Requiring firms, rather than individuals, to remit sales taxes improves tax compliance. In the U.S., this shift toward firm-based remittance rules for remote purchases occurred gradually after South Dakota v. Wayfair. Using comprehensive and high-frequency local sales tax revenue data, we show that due to the increased compliance after Wayfair, revenues increased in the average locality by 5.4% and subsequently increased 5.1% after states required platforms to pay taxes on behalf of marketplace vendors. Critically, these effects are mainly a result of substantial increases in small towns and counties, with much smaller effects in larger jurisdictions. Increases in tax compliance thus influence both the level of tax revenues as well as its distribution across places. |
| Keywords: | sales tax, online shopping, e-commerce, remittance rules, tax revenue, compliance |
| JEL: | H25 H71 L81 R51 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11252 |
| By: | Samuel Moore; Ana Maria Santacreu |
| Abstract: | Ireland’s elimination of a controversial tax avoidance strategy appears to be driving a recent increase in royalty payments from Ireland to the U.S. |
| Keywords: | royalties; taxes; tax avoidance |
| Date: | 2024–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:98681 |
| By: | Yunho Cho; James Morley; Aarti Singh |
| Abstract: | Using household survey data for the U.S. and Australia, we quantify the role of taxes and transfers in providing consumption insurance against income risk. While the two countries differ substantially in their degree of tax and transfer progressivity and the extent to which it reduces the variability of disposable income, we find using a semi-structural model of income, net taxes, and consumption that the overall role of taxes and transfers in affecting the elasticity of consumption with respect to permanent income shocks is similar, with an estimated 5.4 percentage point reduction for the U.S. versus 4.8 for Australia. We interpret this result using a stylized life-cycle model with incomplete markets. Counterfactual analysis for a calibrated version of the structural model shows that, while higher progressivity increases the role of taxes in providing consumption insurance, these effects are partially mitigated by less self-insurance given higher marginal tax rates. The level of wealth relative to income also reduces the effects of progressivity on consumption insurance. Thus, higher wealth-to-income ratios in Australia can explain why, despite higher progressivity, the impact of taxes and transfers on consumption insurance is similar to the U.S. |
| Keywords: | progressive taxes, redistributive transfers, consumption insurance, incomplete markets |
| JEL: | C13 C33 D12 D14 D15 E21 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2024-52 |
| By: | Nicolò Cesa-Bianchi; Roberto Colomboni; Maximilian Kasy |
| Abstract: | We consider the problem of repeatedly choosing policies to maximize social welfare. Welfare is a weighted sum of private utility and public revenue. Earlier outcomes inform later policies. Utility is not observed, but indirectly inferred. Response functions are learned through experimentation. We derive a lower bound on regret, and a matching adversarial upper bound for a variant of the Exp3 algorithm. Cumulative regret grows at a rate of T2/3. This implies that (i) welfare maximization is harder than the multi-armed bandit problem (with a rate of T1/2 for finite policy sets), and (ii) our algorithm achieves the optimal rate. For the stochastic setting, if social welfare is concave, we can achieve a rate of T1/2 (for continuous policy sets), using a dyadic search algorithm. We analyze an extension to nonlinear income taxation, and sketch an extension to commodity taxation. We compare our setting to monopoly pricing (which is easier), and price setting for bilateral trade (which is harder). |
| Keywords: | optimal taxation, multi-armed bandits, experimental design |
| JEL: | C90 H21 C73 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11259 |
| By: | Olivier CARDI; Kübra HÖKE; Romain RESTOUT |
| Abstract: | By exploiting the downward trend of OECD countries profits’ taxation rooted into international competition to attract capital, we identify exogenous variations in corporate income taxes. Our SVAR-based evidence reveals that a permanent decline in profits’ taxation leads to significant technology improvements which are concentrated in traded industries and generates an expansionary effect on hours which is concentrated in the non-traded sector. While technology dramatically improves in English-speaking and Scandinavian countries, hours significantly increase in continental Europe. A twosector open economy model with endogenous technology decisions can rationalize the evidence conditional on a set of elements which characterize households’ preferences and firms’ ability to improve technology. In line with our estimates, traded technology must display a high elasticity w.r.t. both the domestic and international stock of knowledge in former countries while the weight attached to consumption habits along with wage stickiness shape the expansionary effect on nontradable hours in continental Europe. |
| Keywords: | Corporate taxation; SVAR; Open economy; Endogenous technological change; R&D; Hours worked; Tradables and non-tradables; Labor reallocation; Wage stickiness. |
| JEL: | E23 E62 F11 F41 H25 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-29 |
| By: | Dinara Alpysbayeva; Annette Alstadsæter; Wojciech Kopczuk; Simen Markussen; Oddbjorn Raaum |
| Abstract: | We analyze the reporting response to an ambitiously targeted government support scheme for Norwegian businesses at the very start of the Coronavirus crisis in 2020. Our empirical design is based on cross-checking self-reported data in the applications for support with administratively reported data used for VAT. We find strong evidence that strategic misreporting was present but conclude that its remaining quantitative extent after enforcement actions already taken by the tax authorities was relatively small. Firms tend to misreport 4 percent more often than expected, and the actual support paid out was 5 percent higher than it should have been. We discuss possible reasons for the relatively limited extent of non-compliance and more general lessons for the design of transfer programs |
| JEL: | H25 H26 H83 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32801 |
| By: | Axel H. Börsch-Supan; Johannes Rausch; Luca Salerno |
| Abstract: | Germany, like many other countries, has undergone a series of pension reforms since the 1980s which generally decreased benefit generosity and increased the retirement age due to demographic pressures. This paper investigates whether these reforms have increased income and wealth inequality among retirees. In order to answer this question, we employed counterfactual simulations in which we predict how the income and social security wealth distributions would have developed if these reforms had not taken place, compared to the actual development of the income and social security wealth distributions. Our analysis reveals that the pension reforms has led to an increase in inequality in terms of social security wealth between the 1990s and 2000s and decreased inequality thereafter. The decrease in inequality is mainly driven by social assistance as it represents a lower bound for benefit size and thus mitigates the effect of benefit-reducing reforms for lower income groups. We further divided the total effect of the pension reforms into two components. The first component is the mechanical effect, which keeps retirement probabilities constant and only considers changes in benefit calculation. The second component is the behavioral effect, which describes how SSW differs because of altered retirement probabilities. Our findings indicate that in the German context the behavioral effect is statistically significant but economically small. |
| JEL: | H55 J23 J26 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32796 |
| By: | Cristina Belles-Obrero; Sergi Jiménez-Martín; Han Ye |
| Abstract: | This paper studies the mortality effect of delaying retirement by investigating the impacts of the 1967 Spanish pension reform, which affected the general population and exogenously changed the early retirement age, depending on the date individuals started contributing to the pension system. Using the Spanish administrative data, we find that delaying retirement by one year increases the hazard of dying between the ages of 60 and 69 by 38 percent. We show that the reform leads to higher mortality in all subgroups, and the effects are statistically stronger for those employed in sectors with the highest workplace accidents and for those with low self-value jobs. Moreover, we show that allowing flexible retirement mitigates the adverse effects of delaying retirement. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaeee:eee2024-27 |