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on Public Economics |
| By: | Marian Fink (WIFO); Jitka Janová; Danuše Nerudová; Jan Pavel; Margit Schratzenstaller (WIFO); Friedrich Sindermann-Sienkiewicz; Martin Spielauer (WIFO) |
| Abstract: | The design of tax systems has a considerable impact on the distribution of income and wealth at the household and the individual level, and due to gender-differentiated socio-economic conditions also in a gender perspective. One of the most important areas of taxation is the taxation of personal incomes. Besides the level of income tax rates and the design of the income tax schedule (progressive versus flat tax schedule), the system of household taxation (joint versus individual taxation), the determination of taxable income and the design of tax exemptions (tax allowances versus credits), particularly child-related ones, are crucial determinants of the distributional effects and work incentives of the personal income tax. The study presents an overview of the microsimulation results for selected provisions of the personal income tax system on income distribution and work incentives. The microsimulations are based on EUROMOD for six selected EU countries: Germany, Austria, Spain, Czech Republic, UK, and Sweden, countries of different "families" of welfare and taxation traditions. |
| Keywords: | EUROMOD, microsimulations, gender effects, income taxation |
| Date: | 2019–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2019:i:578&r=all |
| By: | Ghatak, Maitreesh; Maniquet, Francois |
| Abstract: | In this paper, we review possible theoretical justifications of a universal basic income (UBI) scheme and also examine the determinants of its feasibility and scope. We begin by contrasting the unconditionality of UBI with the many conditions that typically accompany other welfare policies. Possible justifications for an unconditional UBI range from pure normative reasons to practical reasons due to the problem of screening beneficiaries and imperfections in institutions in charge of implementing tax and welfare policies. We also explore theoretically the conditions that determine the feasibility and size of a UBI. The broad picture that emerges from our review is that both normative and practical considerations make UBI easier to defend as a tool of poverty alleviation in poor economies than a tool to achieve social justice in rich ones. |
| Keywords: | Labour Supply; unconditional cash transfers; universal basic income; welfare policies |
| JEL: | D31 D63 H24 H31 I38 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13635&r=all |
| By: | Christoph Engel (Max Planck Institute for Research on Collective Goods); Luigi Mittone (University of Trento); Azzurra Morreale (LUT University, Finland) |
| Abstract: | Arguably, for many citizens the perceived expected disutility from sanctions is smaller than the monetary gain from tax evasion. Nevertheless most people pay their taxes most of the time. In a lab experiment, we show that the willingness to pay taxes even absent enforcement is indeed pronounced. Yet voluntary compliance is reduced if participants learn that income is heterogeneous. The effect is driven by participants with the lowest income. The reduction obtains irrespective of the tax regime. If the tax is proportional to income, or progressive, participants become more skeptical about the willingness of participants with high income to comply. |
| Keywords: | tax evasion, tax morale, heterogeneity, income inequality, lump sum tax, proportional tax, progressive tax, beliefs, path model |
| JEL: | C30 C91 D01 D02 D31 D63 D91 H26 K34 K42 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2019_02&r=all |
| By: | Hougaard Jensen, Svend E.; Lassila, Jukka; Määttänen, Niku; Valkonen, Tarmo; Westerhout, Ed |
| Abstract: | Abstract According to the 2018 Mercer Global Pension index, the pension systems of Denmark, Finland and the Netherlands are the best three in the world. This paper seeks to identify the common elements of success of these three pension systems, including the institutional framework within which they operate. We emphasize the collective and compulsory nature of the earnings-related pension schemes and the important role for social partners in all three pension systems. We also discuss what we believe are the most important challenges these systems face. |
| Keywords: | Pensions, Pension taxation, Fiscal sustainability, Saving, Retirement |
| JEL: | D58 E21 H55 H68 J11 J26 |
| Date: | 2019–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:rif:wpaper:66&r=all |
| By: | Kevin x.d. Huang (Vanderbilt University); Qinglai Meng (Oregon State University); Jianpo Xue (Renmin University of China) |
| Abstract: | This paper overturns the conventional wisdom that reliance on capital tax rate adjustment to ensure fiscal sustainability is immune to extrinsic uncertainty. The interaction of capital taxation and endogenous capital utilization generates fiscal increasing returns and factor share redistribution to induce sunspots expectations. Capital depreciation allowance debilitates this mechanism to preempt policy induced instability while achieving budget objective. Self-fulfilling fluctuations can occur in real-world economies, unless their depreciation allowances are sufficiently higher or income tax rates lower than the current levels. This adds a short-run motivation to the long-run approach to capital taxation and the supply-side view of fiscal policy reforms. |
| Keywords: | Capital income taxation, Depreciation allowance, Endogenous utilization, Fiscal increasing returns, Self-fulfilling prophecies |
| JEL: | E6 E3 |
| Date: | 2019–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-19-00008&r=all |
| By: | José García-Montalvo; Amedeo Piolatto; Josep Raya |
| Abstract: | We model the behaviour of a buyer trying to evade the real estate transfer tax. We identify over-appraisal as a key, easily-observable element that is inversely related with tax evasion. We conclude that the tax authority could focus auditing efforts on low-appraisal transactions. We include `behavioural' components (shame and stigma) allowing to introduce buyers' (education) and societal (social capital) characteristics that explain individual and idiosyncratic variations. Our empirical analysis confirms the predictions using a unique database, where we directly observe: real payment, value declared to the authority, appraisal, buyers' educational level and local levels of corruption and trust. |
| Keywords: | transfer tax, Tax evasion, second-hand housing market, overappraisal, Loan-To-Value, corruption, social capital, stigma, shame, education |
| JEL: | G21 H26 R21 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1080&r=all |
| By: | José Garcia Montalvo; Amedeo Piolatto; Josep M. Raya |
| Abstract: | We model the behaviour of a buyer trying to evade the real estate transfer tax. We identify over-appraisal as a key, easily-observable element that is inversely related with tax evasion. We conclude that the tax authority could focus auditing e orts on low-appraisal transactions. We include `behavioural'components (shame and stigma) allowing to introduce buyers'(education) and societal (social capital) characteristics that explain individual and idiosyncratic variations.Our empirical analysis con rms the predictions using a unique database, where we directly observe: real payment, value declared to the authority,appraisal, buyers' educational level and local levels of corruption and trust. |
| Keywords: | transfer tax, tax evasion, second-hand housing market, overappraisal, Loan-To-Value, corruption, social capital, stigma, shame, education |
| JEL: | G21 H26 R21 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1645&r=all |
| By: | Lieberknecht, Philipp; Wieland, Volker |
| Abstract: | There is substantial disagreement about the consequences of the Tax Cuts and Jobs Act (TCJA) of 2017, which constitutes the most extensive tax reform in the United States in more than 30 years. Using a large-scale two-country dynamic general equilibrium model with nominal rigidities, we find that the TCJA increases GDP by about 2% in the medium-run and by about 2.5% in the long-run. The short-run impact depends crucially on the degree and costs of variable capital utilization, with GDP effects ranging from 1 to 3%. At the same time, the TCJA does not pay for itself. In our analysis, the reform decreases tax revenues and raises the debt-to-GDP ratio by about 15 percentage points in the medium-run until 2025. We show that combining the TCJA with spending cuts can dampen the increase in government indebtedness without reducing its expansionary effect. |
| Keywords: | fiscal policy transmission; macroconomic modeling; Tax Cuts; tax reform; TJCA |
| JEL: | E1 E62 E63 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13629&r=all |
| By: | Landais, Camille; Spinnewijn, Johannes |
| Abstract: | In the absence of unemployment insurance (UI) choices, the standard approach to estimating the value of UI is to infer it from the observed consumption response to job loss in combination with some assumption on preferences. Exploiting the unique data and policy context in Sweden, we propose two alternative approaches, which we implement and compare to the standard consumption-based approach on the exact same sample of workers. Our empirical analysis reveals that the drop in consumption expenditures upon job loss is relatively small (~ 13 percent), but that the marginal propensity to consume (MPC), estimated using variation in local government transfers, is 30 - 40 percent higher when unemployed than when employed. This wedge in MPCs, the focus of our first approach, reveals a high relative price of smoothing consumption, which confirms direct evidence on the limited consumption smoothing means available during unemployment. The estimated relative price provides a lower-bound on the value of UI, which turns out to be substantially higher than the consumption-based estimate under standard preference assumptions. Exploiting the UI choices embedded in the Swedish UI system, we also propose a Revealed-Preference approach, which confirms that the average value of UI is large in our setting, but also reveals substantial dispersion in the value of UI, above and beyond the variation in consumption drops. |
| Keywords: | Consumption Smoothing; MPC; Revealed Preference; Unemployment insurance |
| JEL: | H20 J64 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13624&r=all |
| By: | Christophe J Waerzeggers; Cory Hillier |
| Abstract: | Designing Interest and Tax Penalty Regimes |
| Keywords: | Tax revenue;Market interest rates;Tax assessments;Interest rates on loans;Tax evasion;administrative penalty;underpayment;tax authority;late payment;taxpayer |
| Date: | 2019–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imftlt:19/01&r=all |
| By: | António Afonso; Ludger Schuknecht |
| Abstract: | We assess how “big” government should reasonably be in a number of advanced countries. First, we will link the recent findings of Data Envelope Analysis on efficient public expenditure with the question of the size of the government. Second, we report descriptive analysis of various government performance indicators in relation to public expenditure to provide indications of overall “optimal” across spending categories. In principle, the highest savings potential is in the biggest expenditure categories, public consumption and social expenditure. |
| Keywords: | government size; government efficiency; DEA; advanced economies |
| JEL: | C14 E62 H11 H50 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0782019&r=all |
| By: | David L. Sjoquist (The Center for State and Local Finance, Georgia State University, USA) |
| Abstract: | The Great Recession’s substantial effect on state revenue has been well documented. State tax revenue decreased: By 2017, state tax revenue as a percentage of income was just 5.79 percent, which is 9 percent less than in 2007 and 4.66 percent less than in 2013. An obvious question is, why has state tax revenue as a percentage of income not returned to its pre-Great Recession level? There are two potential reasons: Either economic growth has not increased the tax base sufficiently or policymakers have not raised taxes sufficiently. This paper explores this question and whether the post-2008 period could be a “new normal.” I first discuss the trend in total state taxes as a percentage of income. I then discuss four specific taxes to provide a framework for discussing policy decisions. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ays:cslfwp:cslf1903&r=all |