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on Public Economics |
| By: | Rauh, Joshua D. (Hoover Institution,); Shyu, Ryan (Stanford Graduate School of Business,) |
| Abstract: | Drawing on the universe of California income tax filings and the variation imposed by a 2012 tax increase of up to 3 percentage points for high-income households, we present new findings about the effects of personal income taxation on household location choice and pre-tax income. First, over and above baseline rates of taxpayer departure from California, an additional 0.8% of the California residential tax filing base whose 2012 income would have been in the new top tax bracket moved out from full-year residency of California in 2013, mostly to states with zero income tax. Second, to identify the impact of the California tax policy shift on the pre-tax earnings of high-income California residents, we use as a control group high-earning out-of-state taxpayers who persistently file as California non-residents. Using a differences-in-differences strategy paired with propensity score matching, we estimate an intensive margin elasticity of 2013 income with respect to the marginal net-of-tax rate of 2.5 to 3.3. Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform. |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3835&r=all |
| By: | Marius Brülhart; Jonathan Gruber; Matthias Krapf; Kurt Schmidheiny |
| Abstract: | We study how reported wealth responds to changes in wealth tax rates. Exploiting rich intra-national variation in Switzerland, the country with the highest revenue share of annual wealth taxation in the OECD, we find that a 1 percentage point drop in the wealth tax rate raises reported wealth by at least 43% after 6 years. Administrative tax records of two cantons with quasi-randomly assigned differential tax reforms suggest that 24% of the effect arise from taxpayer mobility and 20% from house price capitalization. Savings responses appear unable to explain more than a small fraction of the remainder, suggesting sizable evasion responses in this setting with no third-party reporting of financial wealth. |
| Keywords: | wealth taxation, behavioral responses, taxpayer mobility, evasion, Switzerland |
| JEL: | H24 H31 H73 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7908&r=all |
| By: | Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana |
| Abstract: | Many Americans claim Social Security benefits early, though this leaves them with lower benefits throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict claiming delays if, by delaying benefits, people received a lump sum instead of an annuity. We predict that current early claimers would defer claiming by a year given actuarially fair lump sums, and the predictions conform with respondents' answers to a strategic survey about the lump sum. In other words, such a reform could provide an avenue for encouraging delayed retirement without benefit cuts or tax increases. Moreover, many people would still defer claiming even for smaller lump sums. |
| Keywords: | retirement,annuity,delayed claiming,pension,early retirement,Social Security |
| JEL: | G11 G22 H55 J26 J32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:629&r=all |
| By: | Jérémy BOCCANFUSO (Paris School of Economics; EHESS.); Antoine FEREY (CREST; Ecole Polytechnique.) |
| Abstract: | This paper studies how information frictions in agents’ tax perceptions affect the design of actual tax policy. Developing a positive theory of tax policy, we show that agents’ inattention interacts with policymaking and induces the government to implement inefficiently high tax rates: this is the taxation bias. We quantify the magnitude of this policy distortion for the US economy. Overall, our findings suggest that existing information frictions – and thereby tax complexity – lead to undesirable, large and regressive tax increases. |
| Keywords: | Optimal taxation; inattention. |
| JEL: | H21 D90 |
| Date: | 2019–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2019-16&r=all |
| By: | António Afonso; João Tovar Jalles; Ana Venâncio |
| Abstract: | This paper evaluates the relevance of the taxation for public spending efficiency in a sample of OECD economies in the period 2003-2017. First, we compute the data envelopment analysis (DEA) scores and the Malmquist productivity index to measure the change in total factor productivity, the change in efficiency and the change in technology. Second, we explain these newly computed public efficiency scores with tax structures using a reduced-form panel data regression specification. Looking at the period between 2007 and 2017, our main findings are as follows: inputs could be theoretically lower by approximately 32-34%; the Malmquist indices show an overall decrease in technology and in TFP. Crucial for policymaking, we find that expenditure efficiency is negatively associated with taxation, more specifically direct and indirect taxes negatively affect government efficiency performance, and the same is true for social security contributions. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:econwp:_25&r=all |
| By: | Huizinga, Harry (Tilburg University, Center For Economic Research); Todtenhaupt, Maximilian; Voget, Johannes (Tilburg University, Center For Economic Research); Wagner, W.B. (Tilburg University, Center For Economic Research) |
| Abstract: | This paper examines the impact of capital income taxation on the composition of foreign portfolio investment. Studying bilateral portfolio positions among a sample of 37 countries over the period 2001-2015, we find that capital gains and dividend taxation reduce the share of equities in foreign investments, while interest taxation increases this share. The results suggest that domestic capital income taxation affects the worldwide asset allocation of domestic investors. The estimated tax sensitivities imply a significant increase in country’s external wealth following a tax policy change that stimulates investors to hold higher-yielding equity investments. |
| Keywords: | Asset allocation; capital income taxation; foreign portfolio investment |
| JEL: | G11 H24 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:98e2405a-8b3f-4c10-a47b-b09b7d52d976&r=all |
| By: | Michal Horváth; Zuzana Siebertová |
| Abstract: | Fundamental income tax reforms are usually justified by or opposed because of large employment implications. The employment gains and losses are supposed to originate from various behavioural and dynamic effects of tax reforms over the medium to long term. To test the limits of such arguments, we study hypothetical radical measures designed to have potentially large employment effects in the context of Slovakia. A close inspection of the different implications of such tax reforms for adjustment on the extensive margin of the labour market reveals that promises or worries of large employment effects have little empirical support. This is because labour supply responses to ‘making work pay’ are small, the requirement of revenue neutrality limits the extent to which (dis)incentivising work is feasible, and because income effects arising from positive assortative mating within families counteract total individual-level effects. Our framework suggests the focus of tax reformers should be on the variation in effective labour supply coming from intensive margin effects. |
| Keywords: | microsimulation, dynamic general equilibrium, employment, labour supply elasticity, tax reform |
| JEL: | E24 H24 H31 J22 |
| Date: | 2019–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:cel:dpaper:54&r=all |
| By: | Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Dolmas, James (Federal Reserve Bank of Dallas); Young, Eric R. (Federal Reserve Bank of Cleveland) |
| Abstract: | We study the political determination of flat tax systems using a workhorse macroeconomic model of inequality. There is significant variation in preferred tax policy across the wealth and income distribution. The majority voting outcome features (i) zero labor income taxation, (ii) simultaneous use of capital income and consumption taxation, and (iii) essentially zero transfers. This policy is supported by a coalition of low- and middle-wealth households. Zero labor income taxation is supported by households with below average wealth, while the middle-wealth households prefer to keep the transfer (and thus other tax rates) low. We also show that the outcome is sensitive to assumptions about the voting power of household groups, the degree of wealth and income mobility, and the forward-looking nature of votes. |
| Keywords: | Political Economy; Essential Set; Voting; Inequality; Incomplete Markets; |
| JEL: | D52 D72 E62 |
| Date: | 2019–09–25 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:144202&r=all |
| By: | Michal Horvath (University of York); Zuzana Siebertova (Council for Budget Responsibility) |
| Abstract: | Fundamental income tax reforms are usually justified by or opposed because of large employment implications. The employment gains and losses are supposed to originate from various behavioural and dynamic effects of tax reforms over the medium to long term. To test the limits of such arguments, we study hypothetical radical measures designed to have potentially large employment effects inthe context of Slovakia. A close inspection of the different implications of such tax reforms for adjustment on the extensive margin of the labour market reveals that promises or worries of large employment effects have little empirical support. This is because labour supply responses to ‘making work pay’ are small, the requirement of revenue neutrality limits the extent to which (dis)incentivising work is feasible, and because income effects arising from positive assortative mating within families counteract total individual-level effects. Our framework suggests the focus of tax reformers should be on the variation in effective labour supply coming from intensive margin effects. |
| Keywords: | microsimulation, dynamic general equilibrium, employment, labour supply elasticity, tax reform |
| JEL: | E24 H24 H31 J22 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbe:wpaper:201903&r=all |
| By: | Moretti, Enrico (University of California, Berkeley); Wilson, Daniel J. (Federal Reserve Bank of San Francisco) |
| Abstract: | We study the effect of state-level estate taxes on the geographical location of the Forbes 400 richest Americans and its implications for tax policy. We use a change in federal tax law to identify the tax sensitivity of the ultra-wealthy’s locational choices. Before 2001, some states had an estate tax and others didn’t, but the tax liability for the ultra-wealthy was independent of their domicile state due to a federal credit. In 2001, the credit was phased out and the estate tax liability for the ultra-wealthy suddenly became highly dependent on domicile state. We find the number of Forbes 400 individuals in estate tax states fell by 35% after 2001 compared to non-estate tax states. We also find that billionaires’ sensitivity to the estate tax increases significantly with age. Overall, billionaires’ geographical location appears to be highly sensitive to state estate taxes. We then estimate the effect of billionaire deaths on state tax revenues. We find a sharp increase in tax revenues in the three years after a Forbes billionaire death, totaling $165 million for the average billionaire. In the last part of the paper, we study the implications of our findings for state tax policy. We estimate the revenue costs and benefits for each state of having an estate tax. The benefit is the one-time tax revenue gain when a wealthy resident dies, while the cost is the foregone income tax revenues over the remaining lifetime of those who relocate. Surprisingly, despite the high estimated tax mobility, we find that the benefit exceeds the cost for the vast majority of states. |
| Date: | 2019–10–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2019-25&r=all |
| By: | Kurita, Kenichi; Hori, Nobuaki; Katafuchi, Yuya |
| Abstract: | This paper tries to challenge two puzzles in the welfare benefit program. The first puzzle is non-take-up welfare which means poor people do not take-up welfare even though they are approved to take-up. Second, empirical evidence suggests that there may exist the inverse U-shaped relationship between benefit level and beneficiary ratio. We present a model of welfare stigma as a hypothesis to explain the above puzzles. Specifically, we investigate the statistical discrimination view model. Results are summarized as the relationship between two types of elasticity. |
| Keywords: | Stigma, Take-up, Minimum income guarantee, OECD panel data, Poverty |
| JEL: | H31 H53 I38 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:96836&r=all |
| By: | Kurt J. Lavetti; Thomas DeLeire; Nicolas R. Ziebarth |
| Abstract: | The ACA requires insurers to provide cost-sharing reductions (CSRs) to low-income consumers on the marketplaces. We link 2013-2015 All-Payer Claims Data to 2004-2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the value of CSRs that are solely determined by income. We find that enrollees with lower cost sharing have higher levels of health care spending, controlling for past health care use. We estimate the demand elasticity of total health care spending to be -0.10, but find larger elasticities for emergency room care, lifestyle drugs, and low-value care. We also find positive cross-price elasticities between outpatient and inpatient care. |
| JEL: | H24 H41 H43 H51 I11 I18 J32 J33 J68 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26430&r=all |
| By: | Peter Kjær Kruse-Andersen; Peter Birch Sørensen |
| Abstract: | We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage occurring via international trade in electricity and via shifts between domestic and foreign production of other goods. The optimal tax-subsidy scheme is based on an intuitive principle: Impose a uniform carbon tax on all additions to global emissions caused by changes in domestic production and consumption of energy, including additions to emissions occurring via shifts in international trade. Emissions from the sector exposed to foreign competition should be taxed at reduced rates to avoid excessive carbon leakage, and a part of the carbon tax on electricity should be levied at the consumer rather than the producer level to ensure taxation of the carbon content of imported electricity. Producers of renewables-based electricity should receive a subsidy to internalize their contribution to the reduction of global emissions. In other sectors emissions should be taxed at a uniform rate corresponding to the marginal social cost of meeting the target for emissions reduction. Simulations calibrated to data for the Danish economy suggest that redesigning energy taxes and subsidies to account for carbon leakage can generate a welfare gain. |
| Keywords: | optimal unilateral climate policy, carbon leakage, optimal energy taxes and subsidies |
| JEL: | H21 H23 Q48 Q54 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7920&r=all |