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on Public Finance |
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Issue of 2022‒12‒05
eleven papers chosen by |
| By: | David R. Agrawal; Aline Bütikofer |
| Abstract: | The COVID-19 crisis poses new policy challenges and has spurred new research agendas in public economics. In this article, we selectively reflect on how the field of public economics has been shaped by the COVID-19 pandemic and discuss several areas where more research is necessary. We highlight major changes and inequalities in the labor market and K-12 education, in addition to discussing how technological change creates new challenges for the taxation of income and consumption. We discuss various policy responses to these challenges and the role of fiscal federalism in the context of worldwide crises. Finally, we summarize the key issues discussed at the 2021 International Institute of Public Finance Congress and the papers published in this special issue. |
| Keywords: | public economics, labor economics, education, tax, expenditure, Covid-19, inequality, fiscal federalism |
| JEL: | H00 J00 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10005&r=pub |
| By: | Kroft Kory; Laliberté Jean-William P.; Leal Vizcaíno René; Notowidigdo Matthew J. |
| Abstract: | This paper studies commodity taxation in a model featuring heterogeneous consumers, imperfect competition, and tax salience. We derive new formulas for the incidence and marginal excess burden of commodity taxation highlighting interactions between tax salience and market structure. We estimate the necessary inputs to the formulas by using Nielsen Retail Scanner and Consumer Panel data covering grocery stores and households in the U.S. and detailed sales tax data. We estimate a large amount of pass-through of taxes onto consumer prices and find that households respond more to changes in prices than taxes. We also estimate significant heterogeneity in tax salience across households. We calibrate our new formulas using these results and conclude that essentially all of the incidence of sales taxes falls on consumers, and the marginal excess burden of taxation is larger than estimates based on standard formulas that ignore imperfect competition and tax salience. |
| Keywords: | Sales taxes;Marginal Excess Burden;Incidence;Salience;Imperfect Competition |
| JEL: | D12 D22 D43 D60 L13 H25 H71 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2022-09&r=pub |
| By: | Anna D'Annunzio; Antonio Russo |
| Abstract: | We analyze the effects of commodity taxation in markets where suppliers implement second-degree price discrimination schemes, such as offering different package sizes and quality-differentiated versions of the same product. In these markets, suppliers distort the quantity (or quality) intended for all types of consumers, except for those with the highest marginal willingness to pay. We show that differentiated ad valorem taxes can alleviate this distortion, and thus increase government revenue as well as welfare, provided the tax rate increases with the size (or quality) of the good supplied. |
| Keywords: | commodity taxation, tax incidence, price discrimination |
| JEL: | D40 H21 H22 L10 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10007&r=pub |
| By: | Casas, Pablo; Torres, José L. |
| Abstract: | This paper explores the consequences of automation for public finance. We find that as the automation rate increases, the government size, measured as the fiscal revenues to output ratio, declines due to the substitution of traditional inputs which bear the burden of taxes by the new automatic technology. These results are explained by the effects of automation on labor, where taxation of labor income (including social security contributions) represents the most important source of fiscal revenues in most advanced economies. The paper performs two additional counterfactual experiments. First, we calculate how individual tax rates should be changed in response to automation in order to keep constant fiscal revenues from the different sources of taxes. However, this experiment reveals that this fiscal policy would have significant harmful effects on output and labor, and that a deep reform of the current tax mix is compulsory to offset the effects of automation on public finance. Second, we calculate the tax rate on capital, without modifying the other tax rates, required to keep constant the size of the government, resulting in a capital income tax rate of around 0.77 for an automation rate of 45%. |
| Keywords: | Automation; Taxes; Fiscal revenues; Autonomous capital; Traditional inputs |
| JEL: | E22 E23 H30 O33 |
| Date: | 2022–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115271&r=pub |
| By: | Ferey, Antoine (LMU Munich) |
| Abstract: | This paper analyzes the interactions between redistribution and unemployment insurance policies and their implications for the optimal design of tax-benefit systems. In a setting where individuals with different earnings abilities are exposed to unemployment risk on the labor market, I characterize the optimal income tax schedule and the optimal unemployment benefit schedule in terms of empirically estimable sufficient statistics. I provide a Pareto-efficiency condition for tax-benefit systems that implies a tight link between optimal redistribution and optimal unemployment insurance: the steeper the profile of income taxes is, the flatter the profile of unemployment benefits should be, and vice versa. Optimal replacement rates are therefore monotonically decreasing with earnings, from 1 at the bottom of the earnings distribution to 0 at the top, and redistribution through unemployment benefits is efficient. Empirical applications show that these interactions between redistribution and unemployment insurance have important quantitative implications. |
| Date: | 2022–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:345&r=pub |
| By: | Jonathan Meer; Joshua Witter |
| Abstract: | Most antipoverty policy in the United States focuses on families with children, but efforts to assist childless adults have gained traction in recent years. We examine the impact of the Earned Income Tax Credit on the labor force outcomes of childless adults using the age-25 eligibility discontinuity. We find no impacts on labor force participation and employment outcomes, which may be due to lack of information about the credit, lack of behavioral response due to its small size, or that childless adults already have very high labor force participation rates. |
| JEL: | H22 H24 J20 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30632&r=pub |
| By: | Abouk, Rahi (William Paterson University); Courtemanche, Charles (University of Kentucky); Dave, Dhaval M. (Bentley University); Feng, Bo (American Institutes for Research); Friedman, Abigail S. (Yale University); Maclean, J. Catherine (Temple University); Pesko, Michael (Georgia State University); Sabia, Joseph J. (San Diego State University); Safford, Samuel (San Diego State University) |
| Abstract: | Over the past decade, rising youth use of e-cigarettes and other electronic nicotine delivery systems (ENDS) has contributed to aggressive regulation by state and local governments. Between 2010 and mid-2019, ten states and two large counties adopted ENDS taxes. We use two large national surveys (Monitoring the Future and the Youth Risk Behavior Surveillance System) to estimate the impact of ENDS taxes on youth tobacco use. We find that ENDS taxes reduce youth ENDS consumption, with estimated ENDS tax elasticities of -0.06 to -0.21. However, we estimate sizable positive cigarette cross-tax effects, suggesting economic substitution between cigarettes and ENDS for youth. These substitution effects are particularly large for frequent cigarette smoking. We conclude that the unintended effects of ENDS taxation may considerably undercut or even outweigh any public health gains. |
| Keywords: | electronic nicotine delivery systems (ENDS), e-cigarettes, vaping, cigarettes, smoking, taxes, youth |
| JEL: | H2 I1 I18 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15655&r=pub |
| By: | Hoehn-Velasco, Lauren (Georgia State University); Pesko, Michael (Georgia State University); Phillips, Serena (Georgia State University) |
| Abstract: | This study examines the long-term link between in-utero cigarette taxes and adult prenatal smoking. We use U.S. birth certificate records to demonstrate that exposure to higher in-utero cigarette taxes (over 1965-2001) reduces later-life adult pre-pregnancy and prenatal smoking. We also show that higher in-utero cigarette taxes have long-lasting effects on adult health, and intergenerational consequences for infant health. Finally, we demonstrate that larger in-utero tax responsiveness correlates with smaller contemporary cigarette tax responsiveness, suggesting that higher in-utero taxes may alter the composition of remaining smokers and contribute to reductions in contemporary cigarette tax responsiveness. |
| Keywords: | prenatal smoking, cigarette taxes, long-term, early-life influences human capital |
| JEL: | I12 I18 H71 H75 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15656&r=pub |
| By: | Paul Dutronc-Postel (IPP - Institut des politiques publiques); Brice Fabre (IPP - Institut des politiques publiques); Chloé Lallemand (IPP - Institut des politiques publiques); Nolwenn Loisel (IPP - Institut des politiques publiques); Lukas Puschnig (IPP - Institut des politiques publiques) |
| Abstract: | Numerous social spending and tax reforms were decided during the 2017–2022 French presidential term. On average, these measures improved households' standard of living by 1.9%, essentially due to reductions in compulsory levies. However, this average effect masks strong heterogeneity according to the level of household income. Although these reforms led to an average increase in disposable income for all households classified by standard-of-living percentile, the gains were only 0.8% for the poorest 5%, compared with 3.3% for the wealthiest 1%. In line with the government's objectives of encouraging work, the employed experienced an average gain of 2.6%, compared with 0.6% for pensioners and a loss of 1.1% for the unemployed. These effects are due to the switch of social security contributions to the CSG (contribution sociale généralisée), revaluation of the employment bonus (prime d'activité) and the reform of unemployment insurance. The larger gains for the highest incomes can be explained both by the transformation of the wealth tax (impôt de solidarité sur la fortune, ISF) into the tax on real estate assets (impôt sur la fortune immobilière, IFI) and by the introduction of the single flat-rate levy (prélèvement forfaitaire unique, PFU) on capital income. Within each standard-of-living percentile, there is a significant share of losers – 24% on average – despite positive average gains. The combination of increases in indirect taxation (tobacco and energy) with certain reductions in social benefits (housing) or their revaluation below inflation (especially for retirement pensions) has had a negative impact on the disposable income of certain households which have not necessarily benefited from the reductions in compulsory levies. |
| Date: | 2022–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ipppap:halshs-03828699&r=pub |
| By: | Fisher-Post, Matthew (Paris School of Economics); Herault, Nicolas (Melbourne Institute of Applied Economic and Social Research); Wilkins, Roger (Melbourne Institute of Applied Economic and Social Research) |
| Abstract: | We produce estimates of the full distribution of all national income in Australia for the period 1991 to 2018, by combining household survey with administrative tax microdata and adjusting to match National Accounts aggregates. From these estimates, we are able to rigorously document the shifts in income shares over the period, contrasting changes in the distribution of pre-tax and post-tax national income. Comparing Australia to the US and to France, we also compare our new results to traditional household survey-based estimates of inequality. Moreover, we exploit the richness of our unique microdata to shed light on the distribution of national income across and within various population groups not usually identifiable in the tax datasets that underpin reliable top-income estimates. Among our most surprising findings, inequality of post-tax national income is less than inequality of survey-based (post-transfer, disposable) income for Australia. The gender gap in income has stubbornly remained over the past three decades. Finally, we find that Australian inequality of national income is much lower than that of the United States, while it is similar to that of France, although those at the bottom of the income distribution fare better in France than in Australia. |
| Keywords: | income inequality, national accounts |
| JEL: | D31 I31 C81 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15651&r=pub |
| By: | Amina Ebrahim; Jukka Pirttilä |
| Abstract: | This paper uses survey and tax administrative data to analyse the effects of a sizeable employer-borne payroll tax credit for young, low-wage workers in South Africa. We find limited impact of the wage subsidy on employment of young, low-wage workers relative to two comparison groups: slightly older, low-wage workers and slightly higher paid, young workers. We find evidence of increases in entry into employment and decreases in separations of low-wage youth, but these are too small to affect overall employment. |
| Keywords: | Employment, Youth, Wage subsidy, Youth unemployment, South Africa |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2022-124&r=pub |