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on Public Economics |
| By: | Bastani, Spencer (Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala); Waldenström, Daniel (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This chapter 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. |
| Keywords: | AI; Automation; Inequality; Labor Share; Optimal Taxation; Tax Progressivity |
| JEL: | H20 H21 |
| Date: | 2024–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1501 |
| By: | Matteo Dalle Luche; Demetrio Guzzardi; Elisa Palagi; Andrea Roventini; Alessandro Santoro |
| Abstract: | In this paper, we exploit the new data available from the European Central Bank's Distributional Wealth Accounts (DWA) to reconstruct the distribution of capital income in Italy by accounting for heterogeneous returns to capital. With respect to previous estimates, we find that capital income is more concentrated along the income distribution and the Italian tax system is more regressive with lower tax rates hinging on the top 7%. We show that such rates are remarkably lower than those suggested by an optimal taxation approach and we provide estimates for revenues and inequality reductions that could be attained by applying (higher) optimal rates either to capital income or wealth while controlling for various degrees of behavioral responses. These results provide a direction for revenue-increasing and inequality-reducing tax reforms in Italy. |
| Keywords: | Optimal tax; Inequality; Capital Income; Wealth tax |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/26 |
| By: | Jacopo Bassetto; Giuseppe Ippedico |
| Abstract: | Brain drain is a key policy concern for many countries. In this paper we study whether tax incentives are an effective policy to attract high-skilled expatriates back to their home country, exploiting a generous income tax break for Italian returnees. Using administrative data and a Triple Differences design, we find that eligible individuals are 27% more likely to return to Italy. Additionally, we uncover significant effects throughout the wage distribution, revealing that tax-induced migration is a broad phenomenon beyond top earners. A cost-benefit analysis shows that the tax scheme can pay for itself by targeting young high-skilled individuals. |
| Keywords: | tax incentives, return migration, wage distribution |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:not:notgep:2024-05 |
| By: | Hack, Lukas |
| Abstract: | Under nominal progressive taxation, inflation drives up tax rates if the schedule is not adjusted, leading to bracket creep. To isolate bracket creep from other sources of tax rate changes, I propose a non-parametric decomposition of changes in tax rates. Applying the decomposition to German administrative tax records, I find sizeable bracket creep episodes. While the overall importance of bracket creep has decreased over time due to institutional changes, the post-Covid inflation surge led to a resurgence. I characterize how bracket creep affects labor supply decisions in a partial equilibrium framework. Further, I estimate a theory-consistent measure of bracket creep, the indexation gap, which is used to discipline a New Keynesian model with incomplete markets. The model predicts that a given reduction in inflation via a monetary contraction leads to less output costs in an economy with bracket creep. |
| JEL: | E31 E62 H24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302373 |
| By: | Chu, Angus C.; Liao, Chih-Hsing; Peretto, Pietro |
| Abstract: | How does taxation affect growth and inequality? We develop a Schumpeterian model with wealth heterogeneity, which influences the effects of tax policy. Our model features iso-elastic utility on leisure under which the change in consumption dispersion across heterogeneous households may cause a novel positive effect of labor income tax on employment in addition to the usual negative effect, which together yield an overall ambiguous effect. A negative (positive) effect on employment causes a negative (positive) effect on growth and innovation in the short run and also a negative (positive) effect on the real interest rate, which determines asset income. Consequently, labor income tax has an ambiguous effect on gross income inequality but unambiguously increases consumption inequality by reducing disposable wage income. Therefore, its effects on income inequality and consumption inequality are drastically different. We also calibrate the model to examine its quantitative implications. |
| Keywords: | taxation; innovation; inequality; economic growth |
| JEL: | O23 O3 O4 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122219 |
| By: | Anna D'Souza; Zachariah Mampilly |
| Abstract: | The impact of conflict on taxation and development has long been debated. Most studies suggest that conflict will have a depressive effect on state tax collection, negatively impacting economic growth and development. After reviewing the existing literature, we argue for an approach that recognizes conflict's nuanced effects on taxation. We show how violence can trigger the emergence of new taxation authorities, specifically non-state armed groups, including both criminal organizations and insurgent groups. |
| Keywords: | Conflict, Taxation, Development, Armed conflict |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-60 |
| By: | N. S. Gonchar |
| Abstract: | A complete description of taxation systems that ensure sustainable economic development is given. These tax systems depend on production technologies and gross output volumes. Explicit formulas for such dependencies are found. In a sustainable economy, the value added either exceeds or is strictly less than the value of the product produced. The latter is determined by the tax system. The concept of perfect taxation systems is introduced and their explicit form is found. For perfect taxation systems, it is proved that the vector of gross output should belong to the interior of the cone formed by the vectors of the columns of the total cost matrix. It is shown that under perfect taxation systems the vector of gross output must satisfy a certain system of linear homogeneous equations. It is shown, that under certain conditions there are tax systems under which certain industries require subsidies for their existence. Under such taxation systems, the industries that require subsidies are identified. The family of all non negative solutions of the system of linear equations and inequalities is constructed, which allowed us to formulate a criterion for describing all equilibrium states in which partial clearing of markets occurs. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.00505 |
| By: | Nadeem Ul Haque (Pakistan Institute of Development Economics, Islamabad); Ali Salman (Pakistan Institute of Development Economics, Islamabad); Shahid H. Kardar (Pakistan Institute of Development Economics, Islamabad); Syed Shabbar Zaidi (Pakistan Institute of Development Economics, Islamabad); Ikram ul Haq (Pakistan Institute of Development Economics, Islamabad); Manzoor Ahmad (Pakistan Institute of Development Economics, Islamabad); Nasir Iqbal (Pakistan Institute of Development Economics, Islamabad); Mahmood Khalid (Pakistan Institute of Development Economics, Islamabad); Khalil Ahmad (Pakistan Institute of Development Economics, Islamabad) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pid:rrepot:2024:21 |
| By: | Sebastian Becker; Annica Gehlen; Johannes Geyer; Peter Haan |
| Abstract: | We provide novel evidence about the incentive and welfare effects of an increase in the generosity of disability benefits. Importantly, a unique policy variation in Germany allows us to isolate the income effect of a change in benefit generosity. We leverage this quasi-experimental policy variation using an RD design to estimate the effect of increasing disability benefits on employment, earnings, labor market transitions, and mortality outcomes using administrative data on the universe of new disability benefit recipients. Contrary to previous literature, our analysis reveals no significant impact on the employment and earnings of DI recipients due to the increased benefits. However, we find a sizable effect of the probability of returning to the labor market. We find no effects on recipient mortality six years after benefit award, but estimates imply a notable reduction in poverty risk, highlighting meaningful welfare implications of increased generosity. |
| Keywords: | disability insurance, pension reform, wealth effect, labor supply, mortality, RDD |
| JEL: | H55 I12 J22 J26 |
| Date: | 2024–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0050 |
| By: | Giacomo Brusco; Marlies Piek; Tejaswi Velayudhan |
| Abstract: | Refunds are an essential feature of well-functioning VAT systems and take up a sizeable portion of government spending. In South Africa, refunds amount to 50 percent of gross VAT collection, representing a substantial transfer from the government to taxpayers that has to occur at relatively high frequency, often monthly. We show that delays in these refund payments reduce domestic investment, especially by small firms. We use administrative data to provide extensive evidence that firms respond to incentives created by delays and denials of refunds. |
| Keywords: | Value-added tax, event study, Firm behaviour |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-58 |
| By: | Mohamed Yasser Bounnite (SUP'RH Business School & AI); Kinmagbaho Wil Hector; Hector Bounnite; Mohamed Yasser |
| Abstract: | Tax optimization plays a fundamental role in the performance of micro, small, and mediumsized enterprises (MSMEs) in Benin. This article examines how the adoption of effective tax strategies can enhance the profitability and competitiveness of MSMEs. Through an empirical study based on a representative sample of 100 MSMEs, we analyzed their tax practices and their impact on various performance indicators. The results highlight the importance of raising awareness among MSMEs about tax optimization and simplifying tax regulations to encourage broader adoption of effective tax practices. The study also sheds light on the challenges MSMEs face in adopting these strategies, particularly the complexity of tax regulations and the lack of specialized resources. The article offers recommendations to improve the integration of tax optimization into the strategic management of Beninese MSMEs, with a focus on training and supporting business leaders. |
| Abstract: | L'optimisation fiscale joue un rôle fondamental dans la performance des micros, petites et moyennes entreprises (MPME) béninoises. Cet article examine comment l'adoption de stratégies fiscales efficaces peut améliorer la rentabilité et la compétitivité des MPME. À travers une étude empirique basée sur un échantillon représentatif de 100 MPME, nous avons analysé leurs pratiques fiscales et leur influence sur divers indicateurs de performance. Les résultats soulignent l'importance de sensibiliser les MPME à l'optimisation fiscale et de simplifier les régulations fiscales pour encourager une adoption plus large de pratiques fiscales efficaces. L'étude met également en lumière les obstacles rencontrés par les MPME dans l'adoption de ces stratégies, notamment la complexité des régulations fiscales et le manque de ressources spécialisées. L'article propose des recommandations pour améliorer l'intégration de l'optimisation fiscale dans la gestion stratégique des MPME béninoises, en mettant l'accent sur la formation et l'accompagnement des dirigeants. |
| Keywords: | Optimisation fiscale, MPME béninoises, performance financière, stratégies fiscales, compétitivité., African Scientific Journal, compétitivité Tax optimization, Beninese MSMEs, financial performance, tax strategies, competitiveness |
| Date: | 2024–09–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04693798 |
| By: | Lisa Barrow; Bea Rivera; Diane Whitmore Schanzenbach |
| Abstract: | Understanding the evolving interactions between employment, social benefits, and families' well-being is key to designing better policies to both protect families and foster economic growth. Employment both overall and among those living in low-income families has been on a downward trajectory across the last three decades. One notable exception is that low-income women with children were increasingly likely to work between 1992 and 1999 in the aftermath of large changes to social safety net programs to provide more incentives and rewards for work. Since then, low-income women with children have been more likely to be employed than childless women. Over time, payments from social benefits programs have made up a larger share of income among low-income families with children and relatively higher earnings. Among low-income families without children, social benefits have not changed much over time. |
| Keywords: | employment; labor supply; low-income workers; social benefits; maternal employment; Earned Income Tax Credit |
| JEL: | H31 J2 I38 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:98950 |
| By: | Rukara Kahindo, Frederic |
| Abstract: | The objective of this study is to test the relationship between tax pressure and economic growth in the DRC. To achieve this, several analytical models were implemented. These include : (i) an SVAR model that allowed us to extract the short-term dynamics and the long-term relationship between the variables, (ii) a Scully model to determine the optimal tax rate in the DRC, and (iii) a threshold regression model was estimated with the objective of testing the non-linear relationship found in the literature. Our results mainly show three important findings : (i) tax pressure negatively affects economic growth in the short term and slightly less in the long term, (ii) the Scully model suggests that the optimal tax rate is 10 %, which indicates that this rate has already been exceeded by the DRC, and finally, (iii) the threshold regression model contradicts the first two models as it suggests the existence of a threshold of 12.56 %, whose impact on economic growth remains positive throughout the study period. |
| Keywords: | Pression fiscale, croissance économique, modèle SVAR, modèle de regression à seuil. |
| JEL: | H2 |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122246 |
| By: | kahindo, Frederic |
| Abstract: | The objective of this study is to test the relationship between tax pressure and economic growth in the DRC. To achieve this, several analytical models were implemented. These include : (i) an SVAR model that allowed us to extract the short-term dynamics and the long-term relationship between the variables, (ii) a Scully model to determine the optimal tax rate in the DRC, and (iii) a threshold regression model was estimated with the objective of testing the non-linear relationship found in the literature. Our results mainly show three important findings : (i) tax pressure negatively affects economic growth in the short term and slightly less in the long term, (ii) the Scully model suggests that the optimal tax rate is 10 %, which indicates that this rate has already been exceeded by the DRC, and finally, (iii) the threshold regression model contradicts the first two models as it suggests the existence of a threshold of 12.56 %, whose impact on economic growth remains positive throughout the study period. |
| Keywords: | Pression fiscale, croissance économique, modèle SVAR, modèle de regression à seuil. |
| JEL: | H2 |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122245 |
| By: | Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper is about fiscal consolidation measures (i.e. tax hikes and government spending cuts motivated by a desire to reduce the fiscal deficit and public debt) in euro area (EA) countries. The focus is on analysing the growth effects of fiscal adjustments as well as their implications for debt sustainability assessments. I discuss the size and composition of fiscal consolidation by distinguishing three periods the run-up to the EA, when governments faced the Maastricht criteria for joining the monetary union (1992-1998); before and during the recession triggered by the global financial crisis (1999-2009); and the euro crisis (with a specific focus on the 2011-2013 period). The empirical evidence on the growth effects of fiscal consolidation shows that while fiscal adjustments are contractionary, the negative growth effects were particularly strong and persistent during the euro crisis. With regard to the austerity outlook, I show that, beginning in 2025, EA countries are set to implement fiscal consolidations over multiple years so as to meet reformed EU fiscal rules. The adjustment requirements for some member countries are large in historical comparison. The paper argues that the framework for debt sustainability analysis at the heart of the reformed EU fiscal rules downplays the domestic growth impacts of fiscal adjustments and ignores cross-country spill-overs that magnify domestic growth effects. In all likelihood, the reformed framework underestimates the negative growth effects of fiscal consolidation. I conclude that implementing the multi-year fiscal adjustments required to meet EU fiscal rules may not reduce public debt ratios across the EA’s member countries, as the European Commission expects, and that the economic and political implications of austerity may complicate the governance of a fragile EA. |
| Keywords: | Fiscal policy, fiscal consolidation, fiscal multiplier, growth, public debt, euro area |
| JEL: | H30 H63 O47 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:253 |