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on Public Finance |
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Issue of 2024‒03‒18
ten papers chosen by |
| By: | Andrew Bibler; Laura Grigolon; Keith F. Teltser; Mark J. Tremblay |
| Abstract: | Governments increasingly use changes in tax rules to combat evasion. We develop a general approach to point-identify tax compliance along with supply and demand elasticities; identification requires data on prices and quantities before and after changes in tax enforcement and a demand or supply shifter. We illustrate our approach using data on Airbnb collection agreements, where full enforcement is achieved by shifting the tax burden away from hosts to renters via the platform. We find that taxes are paid on roughly zero to 3.5 percent of Airbnb transactions prior to enforcement. |
| Keywords: | tax evasion, compliance, statutory incidence, tax invariance, Airbnb, sharing economy, voluntary collection agreements |
| JEL: | H20 H22 H26 L10 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10921&r=pub |
| By: | James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (Queen Mary, University of London); Paolo Surico (London Business School and CEPR) |
| Abstract: | Using a narrative identification of US tax changes over the post-WWII period, we show that corporate income tax cuts foster R&D spending and innovation, leading to a persistent increase in aggregate productivity and output. In contrast, changes in the average personal income tax rate have mostly short-term e ects. An estimated endogenous productivity model highlights therole of "applied research" - over and above formal R&D - as a main force behind these results, and suggests a social rate of return to investment in innovation between 20% and 75%. |
| Keywords: | corporate taxes, narrative identification, TFP, R&D, technological adoption. |
| JEL: | E23 E62 O32 O34 O38 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:970&r=pub |
| By: | Katrine Jakobsen; Henrik Kleven; Jonas Kolsrud; Camille Landais; Mathilde Muñoz |
| Abstract: | Using administrative data on wealth, firm ownership structure, and migration in Sweden and Denmark, we document international migration patterns among the very wealthy, their impact on the economy, and how they respond to wealth taxation. We show that more than 20% of taxpayers liable to pay wealth tax are business-owners, and that the employment, investments, and value-added of these businesses are negatively affected when their owner migrates out of the country. Exploiting three large reforms, we then isolate the causal effect of wealth taxation on the international location choices of the wealthy. We find significant effects on out-migration flows from increases in the effective wealth tax. But, we also document that the overall level of these migration flows is remarkably small, with annual net-migration rates below .01%. As a result, we find that the aggregate economic effects of tax-induced migration are modest in Scandinavia: a one percentage point increase in the average wealth tax rate on the top 2% decreases the stock of wealthy taxpayers by at most 2% in the long run, and lead to a reduction of at most .03% in aggregate employment and at most .1% in aggregate value- added. Hence, our results suggest that trickle-down effects of tax-induced migration by the wealthy do exist, but that they are quantitatively small. |
| JEL: | D31 E21 H20 H31 L26 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32153&r=pub |
| By: | Ricardo Martinez; Juan D. Moreno-Ternero |
| Abstract: | We take an axiomatic approach to study redistribution problems when agents report income and needs. We formalize axioms reflecting ethical and operational principles such as additivity, impartiality and individual rationality. Different combinations of those axioms characterize three focal rules (laissez faire, full redistribution, and need-adjusted full redistribution) as well as compromises among them. We also uncover the structure of those compromises exploring the Lorenz dominance criterion as well as majority voting. Our analysis provides an axiomatic justification for a linear income tax system. We conclude our analysis resorting to Eurostat's Household Budget Survey from where we illustrate the different redistribution patterns accounting for needs across European countries. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.02802&r=pub |
| By: | Daniele Angelini (University of Konstanz); Stefan Niemann (University of Konstanz); Florian Roeser (University of Konstanz) |
| Abstract: | We analyze the policy trade-offs facing fiscal policy in a dynamic growth model with au-tomation, education choice, and human capital formation. Although beneficial for economic growth, automation contributes to wage inequality. When human capital formation is affected by government spending, fiscal policy can enhance welfare through a coordinated increase in labor and robot taxes. The composition of taxes financing spending on transfers and educa-tion is key in determining the effects on economic growth and inequality, as the robot tax is the more redistributive instrument. We calibrate our model to the US economy and determine the welfare-maximizing tax policy. Optimality requires an initial reduction in the robot tax to foster automation-driven growth, followed by its gradual increase to address widening inequal-ity. Education subsidies can be welfare-improving if they are financed through the labor tax without compromising higher education spending. Finally, we explore robustness under private contributions to higher education. |
| Keywords: | Automation; Education; Human capital; Innovation-driven growth; Inequality; Policy responses |
| JEL: | E23 E25 H23 H52 O31 O33 O40 |
| Date: | 2024–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:2401&r=pub |
| By: | James Alm (Tulane University); Raul A. Barreto (University of Adelaide) |
| Abstract: | Governments are always dealing with unexpected shocks, like wars, terrorism, financial crises, natural disasters, and the like. A recent prominent example is the SARS-CoV-2 pandemic. Since early 2020, governments around the world have enacted a range of unprecedented measures in an attempt to protect their citizens, with quite mixed results. This varied record has in turn had dramatic effects on peoples perceptions of their government, especially on their trust in government and so on their willingness to obey the many government mandates generated by the pandemic. This willingness to obey government mandates extends well beyond pandemic policies to all other dimensions of government laws and regulations. An important dimension of individual compliance with government mandates is tax evasion. What will be the effects of the pandemic and the associated government policies on post-pandemic tax evasion and economic growth, especially via the effects of government policies on "trust" in the government? In this paper we incorporate both tax evasion and trust in an endogenous growth model in order to examine the short and long run impacts on tax evasion of various shocks -- a pandemic shock, a government policies shock, and a tax morale shock (and the resulting impact on trust in government). We then use real data on 11 representative economies to simulate these effects, economies representing developed and developing countries as well as economies representing governments that opted for various policy responses to COVID-19, modelled as a labor productivity shock. We find that varied public policy responses to the pandemic have immediate and persistent impacts on tax evasion in the short and long run, largely via their effects on trust in government. We also find that these evasion impacts vary in important and predictable ways that depend especially on whether government dealt effectively or not with the pandemic. Our methodology is readily adapted to examine the effects of other shocks and their respective policy responses on trust in government, tax evasion, and economic growth. |
| Keywords: | COVID-19, tax evasion and tax compliance, trust, endogenous growth models |
| JEL: | H26 H30 O40 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:2405&r=pub |
| By: | Hagiwara, Takefumi |
| Abstract: | This study investigates the conflicting effects of a debt-financed fiscal policy on endogenous growth in an overlapping generations model with public capital and debt. Although an accumulation of public capital enhances the production efficiency of private capital, it also impedes private capital accumulation by distorting savings allocations through public debt issuance. With a low deficit ratio, the fiscal policy brings new equilibria to an unstable economy. Meanwhile, a debt-financed fiscal policy with a higher deficit ratio causes a fiscal collapse and secular stagnation. |
| Keywords: | Fiscal Sustainability; Public Debt; Public Capital; Secular Stagnation |
| JEL: | E62 H54 H62 O40 |
| Date: | 2024–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120201&r=pub |
| By: | Burani, Nadia; Mantovani, Andrea |
| Abstract: | We consider a duopolistic market in which a green firm competes with a brown rival, and both firms offer vertically differentiated products. Consumers are heterogeneous in both their willingness to pay for intrinsic quality and environmental concern. The latter is positively related to the green firm's market share, giving rise to a green network e¤ect. We characterize how price and quality schedules are set and how consumers sort between the two firms at the market equilibrium. When considering pollution both from consumption and production, we compute total welfare and evaluate the impact of an emission tax and a subsidy for the consumption of the green good. Our analysis demonstrates that efficiency can be achieved through an emission tax, which restores the optimal differential between firms' intrinsic qualities, combined with a discriminatory subsidy, which restores the optimal sorting of consumers. |
| Keywords: | bidimensional product differentiation; environmental concern; green network effect; pollution emissions; price discrimination; subsidy |
| JEL: | D21 L13 H21 Q58 Q51 |
| Date: | 2024–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129135&r=pub |
| By: | Gustafsson, Johan (Department of Economics, Umeå University) |
| Abstract: | The present paper studies how to encourage longer careers by reducing labor income taxes for older workers. The analysis relies on numerical experiments within a general equilibrium overlapping generations model that is calibrated to an average OECD economy. I find that the policy can delay retirement and increase tax revenue if treatment occurs close to, and before, the preferred retirement age. A non-trivial share of the increased post-treatment labor supply can be explained by the substitution of hours worked from the pre-treatment career to the post-treatment career. Lowering the treatment age only leads to small changes in the aggregate labor supply, but is increasingly costly for the government in terms of forgone revenue. Tax shifting toward higher consumption taxes always increases welfare, while tax shifting toward higher capital or labor income taxes paid by younger workers only increases welfare if treatment occurs sufficiently late in the career. |
| Keywords: | age-dependent taxation; OLG model; retirement |
| JEL: | E21 H24 J22 |
| Date: | 2024–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:1023&r=pub |
| By: | Odran Bonnet; Étienne Fize; Tristan Loisel; Lionel Wilner |
| Abstract: | This paper exploits the introduction of the German carbon tax in 2021 as well as excise tax rebates on fuel in both France and Germany, consecutive to the 2022 oil crisis, to infer how fuel tourism responds to changes in relative prices. Based on French high-frequency transaction-level data issued from individual banking accounts, we find substantial displacement between foreign and domestic consumption. When relative prices increase by 1%, the relative cross-border demand decreases by 7.7%. In border areas, the elasticity of tax revenue with respect to foreign prices is as high as 0.5. Moreover, there is no substantial difference in demand response to either carbon or excise tax. Such empirical evidence illustrates the importance of coordinating tax policy within EU. |
| Keywords: | commodity taxation, tax coordination, carbon pricing, fuel tourism, transaction-level data |
| JEL: | H20 H23 H77 R48 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10918&r=pub |