nep-pbe New Economics Papers
on Public Economics
Issue of 2021‒03‒01
eleven papers chosen by
Thomas Andrén

  1. A Tax-Benefit Microsimulation Model for Personal Income Taxation in Italy By Elena Miola; Marco Manzo
  2. Age-targeted Income Taxation, Labor Supply and Retirement By Gustafsson, Johan
  3. Rethinking How We Score Capital Gains Tax Reform By Natasha Sarin; Lawrence H. Summers; Owen M. Zidar; Eric Zwick
  4. Business Incomes at the Top By Wojciech Kopczuk; Eric Zwick
  5. The Elasticity of Taxable Income: A Meta-Regression Analysis By Carina Neisser
  6. Nudges and Threats: Soft vs Hard Incentives for Tax Compliance By Andersson, Henrik; Engström, Per; Nordblom, Katarina; Wanander, Susanna
  7. Tax and compliance of individual taxpayer By Meda Andini; Alfa Rahmiati
  8. An Analysis of Vice President Biden's Economic Agenda: The Long Run Impacts of its Regulation, Taxes, and Spending By Timothy Fitzgerald; Kevin Hassett; Cody Kallen; Casey B. Mulligan
  9. Economic and Fiscal Additionality in Italian Tax Credit on Dwellings Renovation By Marco Manzo; Daniela Tellone
  10. Federalism and public health decentralisation in the time of COVID-19 By Pietrangelo de Biase; Sean Dougherty
  11. Barking Up the Wrong Tree: SMEs' Perception of Tax using the ZMET Method By Puspasari, Novita; Herwiyanti, Eliada; Pinasti, Margani; Institute of Research, Asian

  1. By: Elena Miola (Ministry of Economy and Finance); Marco Manzo (Ministry of Economy and Finance)
    Abstract: The paper presents a static tax-benefit microsimulation model developed by combining the IT-SILC 2016 dataset, a survey on Italian incomes and living conditions, and administrative tax return micro data in the same year. The dataset derives from the exact matching of survey and administrative data. The microsimulation model reproduces in detail the features of Italian personal income tax and benefit system and is aimed at evaluating tax revenue and fiscal policies distributive impact. Redistribution analysis is carried out by using concentration, progressivity and redistribution indices for individual taxpayers and equivalent households. Inequality issues are analysed further through the computation of decile and quintile distribution of household gross and disposable income, by using the tax-benefit microsimulation model.
    Keywords: tax-benefit microsimulation model, personal income taxation, redistribution, inequality
    JEL: D31 H20 H24
    Date: 2021–01
  2. By: Gustafsson, Johan (Department of Economics, Umeå University)
    Abstract: This paper studies the life-cycle effects of favorable marginal tax treatment of older workers on their optimal life-cycle labor supply, retirement timing, and savings. I develop a structural model in continuous time where the life-cycle of a representative agent is divided into three distinct phases: pre-treatment, post-treatment, and retirement. Solutions for consumption/savings, labor supply/leisure, and retirement timing are then obtained by solving the model as a salvage value problem. I then calibrate the model to Swedish earnings data and find that the increased extensive margin labor supply is partially offset by a reduction of the hours of work in the pre-treatment period. The total effect is however an increase in life-cycle labor supply, and consumption.
    Keywords: Retirement age; life cycle; tax heterogeneity; savings; consumption; leisure
    JEL: D15 J22 J26
    Date: 2021–02–04
  3. By: Natasha Sarin (University of Pennsylvania - Carey Law); Lawrence H. Summers (Harvard University - Harvard Kennedy School of Law); Owen M. Zidar (Princeton University - Department of Economics & School of International and Public Affairs; NBER); Eric Zwick (University of Chicago - Booth School of Business; NBER)
    Abstract: We argue the revenue potential from increasing tax rates on capital gains may be substantially greater than previously understood. First, many prior studies focus primarily on short-run taxpayer responses, and so miss revenue from gains that are deferred when rates change. Second, the composition of capital gains has shifted in recent years, such that the share of gains that are highly elastic to the tax rate has likely declined. Third, focusing on capital gains tax collection may understate fiscal spillovers from decreasing the preferential tax treatment for capital gains. Fourth, additional base-broadening reforms, like eliminating stepped-up basis and making charitable giving a realization event, will decrease the elasticity of the tax base to rate changes. Overall, we do not think the prevailing assumption of many in the scorekeeping community—that raising rates to top ordinary income levels would raise little revenue—is warranted. A crude calculation illustrates that raising capital gains rates to ordinary income levels could raise $1 trillion more revenue over a decade than other estimates suggest. Given the magnitudes at stake, scorekeeping procedures employed in evaluating capital gains should be made more transparent and be the subject of external professional debate and review.
    JEL: H0 H2 H3
    Date: 2020
  4. By: Wojciech Kopczuk (Columbia University - Department of Economics; NBER); Eric Zwick (University of Chicago - Booth School of Business)
    Abstract: Business income constitutes a large and increasing share of income and wealth at the top of the distribution. We discuss how tax policy treats and shapes how businesses are organized and how they distribute economic gains to owners, with the focus on closely-held and pass-through firms. These considerations influence whether and how labor and capital income is observed in economic data and feed into research controversies regarding the measurement of inequality and the progressivity of the tax code. We discuss the importance of these issues in the US, and highlight that limited evidence from other countries suggests that they are likely to be important elsewhere.
    JEL: D31 D33 E25 H24 H25 H32
    Date: 2020
  5. By: Carina Neisser (University of Cologne and IZA Bonn)
    Abstract: The elasticity of taxable income (ETI) is a key parameter in tax policy analysis. To examine the large variation found in the literature of taxable and broad income elasticities, I conduct a comprehensive meta-regression analysis using information from 61 studies containing 1,720 estimates. My findings reveal that estimated elasticities are not immutable parameters. They are correlated with contextual factors and the choice of the empirical specification influences the estimated elasticities. Finally, selective reporting bias is prevalent, and the direction of bias depends on whether deductions are included in the tax base.
    Keywords: elasticity of taxable income; income tax; behavioural response; meta-regression analysis
    JEL: C81 H24 H26
    Date: 2021–02
  6. By: Andersson, Henrik (Uppsala University); Engström, Per (Uppsala University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Wanander, Susanna (The Swedish Tax Agency)
    Abstract: We study what induces delinquent taxpayers to pay their taxes due. We use high quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by roughly 10 percentage points. When including actual enforcement, payment increases by around 20 percentage points compared to those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those of much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a “pure nudge”, i.e., the inclusion of an extra piece of paper with no valuable information, has an effect of 7-8 percentage points for those who do not risk enforcement upon non-payment. However, the same nudge has no detectable effect for the group at risk of enforcement. Social-norm messages in turn increase payments both for those who risk enforcement and for those who do not, but to a much smaller degree. We also find that a pure nudge works much better for those who receive a physical letter than for those who receive information electronically, while the reaction to the social-norm nudge is significant for those who get the electronic information.
    Keywords: tax compliance; RCT; nudge; quasi-experiment; regression discontinuity
    JEL: C21 D03 D91 H24 H26
    Date: 2021–02
  7. By: Meda Andini (Airlangga University); Alfa Rahmiati (Airlangga University)
    Abstract: This study aims to obtain empirical evidence about the relationship between income level, tax sanctions, and trust in government with individual taxpayer's compliance through tax morale. This study is designed as a quantitative, and the data analysis used is path analysis. The research sample was 100 individual taxpayers in Pamekasan Regency. We are using path analysis techniques with the help of SPSS software. The results of this study are the income level has a relationship with individual taxpayer's compliance through tax morale, but tax sanctions and trust in the government do not have a relationship with individual taxpayer's compliance through tax morale. The limitation of this research is that the research scope is still limited, only in Pamekasan Regency. Further research related to tax morale can add other independent variables and expand the research sample's scope.
    Keywords: Income level,tax sanctions,trust in government,tax morale,individual taxpayer's compliance
    Date: 2020
  8. By: Timothy Fitzgerald (Texas Tech University - Rawls College of Business); Kevin Hassett (The Lindsey Group; The Hoover Institution); Cody Kallen (University of Wisconsin-Madison - Wisconsin School of Business); Casey B. Mulligan (University of Chicago - Department of Economics; The Committee to Unleash Prosperity; NBER)
    Abstract: We estimate possible effects of Joe Biden’s tax and regulatory agenda. We find that transportation and electricity will require more inputs to produce the same outputs due to ambitious plans to further cut the nation’s carbon emissions, resulting in one or two percent less total factor productivity nationally. Second, we find that proposed changes to regulation as well as to the ACA increase labor wedges. Third, Biden’s agenda increases average marginal tax rates on capital income. Assuming that the supply of capital is elastic in the long run to its after-tax return and that the substitution effect of wages on labor supply is nontrivial, we conclude that, in the long run, Biden’s full agenda reduces full-time equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent.
    Date: 2020
  9. By: Marco Manzo (Ministry of Economy and Finance of Italy); Daniela Tellone (Ministry of Economy and Finance of Italy)
    Abstract: In June 2012, the fiscal policy for the renovation of dwellings has changed considerably with respect to two main aspects: i) the tax credit share has increased from 36% to 50% and ii) the total amount of renovation costs that can benefit of the tax credit increased from 48000 euros to 96000 euros. The aim of this work is to provide an expost analysis of this policy change. The policy effect is evaluated on: the increase in dwellings renovation probability (economic additionality), the increase in the level of renovation expenses and the decrease in underground economy (fiscal additionality). We found that the policy stimulated the likelihood of renovation in terms of fiscal additionality but in terms of economic additionality had a limited effect.
    Keywords: Residential Sector, Tax Credit, Dwelling Renovation Policy, Italy
    JEL: D12 H31 E62
    Date: 2020–07
  10. By: Pietrangelo de Biase; Sean Dougherty
    Abstract: The Coronavirus pandemic has put extreme pressure on public health services, often delivered at the local and regional levels of government. The paper focuses on how countries made changes to the configuration of federalism during the first wave of the pandemic. These changes typically have involved the centralisation and decentralisation of certain health-related activities, as well as the creation of new coordination and funding mechanisms. Specific tools that have been used include an enhanced role of the executive branch (“executive federalism”), the use of centres of government for vertical coordination, as well as the introduction of unique state-of-emergency laws. New horizontal coordination arrangements have also emerged with the more decentralised approaches. The strengths, weaknesses and implementation risks of various approaches are analysed using country examples.
    Keywords: Coronavirus, fiscal federalism, intergovernmental coordination, public health services, subnational governments
    JEL: H11 H70 I18
    Date: 2021–02–01
  11. By: Puspasari, Novita; Herwiyanti, Eliada; Pinasti, Margani; Institute of Research, Asian
    Abstract: Small and Medium Enterprises (SMEs) has been a backbone for Indonesian economy over the years. This study aims to explore and gain an in-depth understanding of SMEs’ perceptions regarding tax imposed by the government. The study is a qualitative investigation in which nine in-depth interviews with SMEs were conducted based on the Zaltman Metaphor Elicitation Technique (ZMET). The findings reveal deep-seated perceptions in SMEs regarding to tax imposed on them. There are 24 elicited constructs which describe SMEs’ mental model of tax. The constructs are framed into four deep metaphors which reflect SMEs perceptions on tax: Distrust to the Government, Misclassification, Mistreatment and Disincentive. This study will contribute to provide suggestion to the government, particularly General Directorate of tax, that in order to give “stick” to SMEs, government may try to give “carrots” in SMEs tax cases. This study contributes to the use of ZMET as a data collecting method to examine issues that tend to be "sensitive". Previously, ZMET has been used widely in marketing research, however this research could prove that other topics of research could also use this method
    Date: 2021–02–09

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