nep-pbe New Economics Papers
on Public Economics
Issue of 2023‒03‒06
six papers chosen by
Thomas Andrén

  1. Home or Away? Profit Shifting with Territorial Taxation By Ms. Li Liu; Dominika Langenmayr
  2. The Welfare and Distributional Consequences of Corporate Tax Cuts in Open Economies By Mamoon Kader; Hashmat Khan; Minjoon Lee; Raul Razo-Garcia
  3. Does income transparency affect support for redistribution? Evidence from Finland's tax day By Maurice Dunaiski; Janne Tukiainen
  4. Financing public education when altruistic agents have retirement concerns By Daniel Montolio; Amedeo Piolatto; Luca Salvadori
  5. Quality-Aware Tax Incentives for Charitable Contributions By Zachary Halberstam; James R. Hines Jr.
  6. The Canada Disability Benefit: Battling Abelism in Design and Implementation By Jennifer, Robson; Lindsay M., Tedds

  1. By: Ms. Li Liu; Dominika Langenmayr
    Abstract: In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
    Keywords: profit shifting; territorial tax system; multinational firms; shifted profit; UK multinational; UK subsidiary; difference-in-differences research design; Total factor productivity; Transnational corporations; Corporate income tax; Income; Wages; Global
    Date: 2022–09–09
  2. By: Mamoon Kader (Department of Economics, Carleton Univeristy); Hashmat Khan (Department of Economics, Carleton Univeristy); Minjoon Lee (Department of Economics, Carleton Univeristy); Raul Razo-Garcia (Department of Economics, Carleton Univeristy)
    Abstract: We develop an open-economy heterogeneous household model with incomplete markets to quantitatively evaluate the welfare and distributional effects—both within and across countries—of the recent corporate tax cut (Tax Cuts and Jobs Act, TCJA) in the U.S. The model allows for examining outcomes under various possibilities including the tax cut in the U.S. being permanent versus temporary and potential ï¬ scal responses of other countries to the TCJA. We ï¬ nd that the TCJA is regressive in the U.S.and has relatively more regressive outcomes in other countries. Whether the wealth-poor in the U.S. beneï¬ t from the TCJA or not depends on the persistence of the tax cut. Finally, when a small country reduces its corporate tax in response to the TCJA, it has a progressive distributional result in its own economy. Classification-JEL, E62, F41. H25
    Keywords: Tax Cuts and Jobs Act, Corporate tax cuts, Distributional effects
    Date: 2022–08–31
  3. By: Maurice Dunaiski (UNODC Research); Janne Tukiainen (Department of Economics, University of Turku.)
    Abstract: This paper examines whether income transparency - the public release of citizens' income information - affects support for redistribution. We leverage a quasi-experiment in Finland, where every year on the so-called tax day, the authorities release income information on Finland's top earners to the public. To identify causal effects we compare respondents who took part in the European Social Survey shortly before and after the event. We find that the tax day increases perceptions that earnings of the top 10% are unfair, but that public support for redistribution remains largely unaffected. A notable exception are top earners, who decrease their support for redistribution, and young people, who increase their support for redistribution. Our results highlight the scope conditions of previous experimental studies, and suggest that increasing exposure to inequality through a real-world policy, rather than experimental treatments, may trigger only marginal changes in support for redistribution.
    Keywords: income transparency, inequality, redistribution, taxes
    JEL: D31 D63 D72 D80 H20 H23 H24 H31
    Date: 2023–02
  4. By: Daniel Montolio (Universitat de Barcelona & IEB); Amedeo Piolatto (Universitat Autònoma de Barcelona & IEB); Luca Salvadori (Universitat Autònoma de Barcelona & TARC & IEB)
    Abstract: We study, theoretically and empirically, the link between voters’ suport for public education and pensions when agents are free to choose between public and private education. We show that the (inter-generational) redistributive component in the retirement system creates a link between pensions and education. Specifically, the current investment in education increases future productivity and, hence, future tax proceeds. This channel applies for households that chose private education too. Consequently, the support for publicly financed education grows together with the generosity and degree of redistribution of the retirement system. The empirical analysis uses repeated cross-country surveys to confirm the model predictions.
    Keywords: Public Education, Educational Choice, Pension System, Bismarckian Factor, Majority Voting
    JEL: D7 H31 H42 H44 H52 H55 I22
    Date: 2022
  5. By: Zachary Halberstam; James R. Hines Jr.
    Abstract: This paper characterizes efficient tax subsidies for charitable contributions, and considers the properties of potential reforms. Contributions are underprovided in the absence of subsidies, and are misdirected if subsidies fail to account for all of the costs that donors incur. It is costly for prospective donors to identify high-quality giving opportunities, so there will be too few of these contributions if all giving receives the same tax treatment. A more efficient alternative is to offer generous tax subsidies that are partially or entirely recouped if recipient organizations subsequently experience precipitous contribution declines.
    JEL: H21 H41 L31
    Date: 2023
  6. By: Jennifer, Robson; Lindsay M., Tedds
    Abstract: The Canada Disability Benefit Act is legislation that, when passed, will establish a new statutory program intended to reduce poverty and support the financial security of working-age persons with disabilities. However, the act is what is known as framework legislation meaning it sets out the high-level context and structure of the proposed program, but it does not provide any describe specific program details. The critical details—including eligibility conditions, the benefit unit and amount, and interactions with existing disability support programs—of the proposed Canada Disability Benefit program will, instead, be set out in regulations following stakeholder engagement. We use a benefit design framework to highlight the program elements that must be defined, highlighting the importance of conducting the design process through an inclusive and intersectional lens to ensure that ableist assumptions are not embedded into benefit design. The framework outlined in this paper should serve as a useful reference for all stakeholders involved in the benefit design process.
    Keywords: Benefit design, Canada Disability Benefit, disability policy, persons with disabilities, poverty
    JEL: H53 I38 J14 J18
    Date: 2023–01–31

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