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on Public Economics |
| By: | James R. Hines, Jr.; Daniel Schaffa |
| Abstract: | Evidence that high tax rates significantly depress capital gains realizations is inconsistent with the implications of neoclassical investment models in unchanging economic environments. Higher tax rates reduce after-tax investment returns, thereby encouraging investors to sell capital assets earlier. For a given investment horizon, higher tax rates need not reward accumulating unrealized gains over long periods – and even if they do, longer accumulations can lead to earlier realizations. Consequently, the sizeable observed effects of capital gains taxes likely reflect investor anticipations of future tax rate changes, rather than the time value of money. |
| JEL: | G11 H24 H31 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31059&r=pbe |
| By: | Guttorm Schjelderup; Frank Stähler |
| Abstract: | This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for all subsidiaries of multinational corporations that are not shell companies. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct payroll costs and user costs of intangible assets twice from the tax base of the top-up tax. Employing a standard multinational firm model, we show that Pillar Two changes the employment, investment and import incentives. For a sufficiently large cost share of labor and/or capital, the Substance-based Income Exclusion is equivalent to a production subsidy. |
| Keywords: | corporate taxation, BEPS, Pillar Two, minimum tax |
| JEL: | F23 F55 H25 H73 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10319&r=pbe |
| By: | Samira Marti; Isabel Martínez; Florian Scheuer; Isabel Z. Martínez |
| Abstract: | Like in many other countries, wealth inequality has increased in Switzerland over the last fifty years. By providing new evidence on cantonal top wealth shares for each of the 26 cantons since 1969, we show that the overall trend masks striking differences across cantons, both in levels and trends. Combining this with variation in cantonal wealth taxes, we then estimate an event study model to identify the dynamic effects of reforms to top wealth tax rates on the subsequent evolution of wealth concentration. Our results imply that a reduction in the top marginal wealth tax rate by 0.1 percentage points in-creases the top 1% (0.1%) wealth share by 0.9 (1.2) percentage points five years after the reform. This suggests that wealth tax cuts over the last 50 years explain roughly 18% (25%) of the increase in wealth concentration among the top 1% (0.1%). |
| Keywords: | wealth tax, inequality, top wealth shares |
| JEL: | H23 H24 D31 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10317&r=pbe |
| By: | Georges Casamatta (LISA - Lieux, Identités, eSpaces, Activités - UPP - Université Pascal Paoli - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We consider an infinite-horizon economy populated by two types of individuals, some individuals being more productive than others. Individuals live one period and are altruistic toward their children. Assuming that the allocation received by a given individual depends only on his type and the one of his parent, we first determine the second-best steady state allocation and then study the optimal bequest and labor income tax functions, that are assumed to be independent. We first demonstrate that the second-best is not implementable with such tax schedules. We then show, through numerical simulations, that the taxation of bequests could go either way. In some cases, it is optimal to redistribute from high to low bequests, while in other cases, large bequests should be subsidized and low bequests should be taxed. These simulations also suggest that the case for taxing large bequests is stronger when individuals are sufficiently altruistic. |
| Keywords: | Bequests, Taxation, Steady state, steady state. JEL: H21, H24 |
| Date: | 2022–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03879870&r=pbe |
| By: | Jean-Charles Rochet (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Bruno Biais (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Taxing financial transactions is often advocated for Pigouvian reasons, when financial speculation is supposed to generate inefficiencies. We adopt instead a Mirrleesian approach, and study the optimal taxation of financial transactions when financial markets are efficient, but the tax system is imperfect, due to asymmetric information. In our model, financial transactions are used by entrepreneurs to hedge shocks on their skills, in line with the New Dynamic Public Finance literature. Entrepreneurs privately observe their skills, but trades in financial markets are publicly observable. The optimal mechanism maximizes a convex combination of utilitarian welfare and Rawlsian criterion, subject to feasibility and incentive constraints. Entrepreneurial projects are subject to liquidity shocks, which can be smoothed by conducting financial transactions. Better skilled entrepreneurs' projects have larger expected profits, but also larger shocks. Trades therefore signal skills, implying it is optimal to tax financial transactions, in addition to capital income and wealth. |
| Date: | 2023–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04016358&r=pbe |
| By: | Eckhard Janeba; Guttorm Schjelderup |
| Abstract: | The OECD’s proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decline of corporate tax rates. We study the revenue effects of the GMT by focusing on strategic tax setting effects. The direct effect from less profit shifting increases revenues in high-tax countries. A secondary effect, however, is that the value of attracting foreign investments increases, which intensifies tax competition. We show that when governments compete via firm-specific or uniform subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies. When competition is by tax rates, revenues may increase however. |
| Keywords: | global minimum tax, tax competition, OECD BEPS, Pillar II |
| JEL: | F23 F55 H25 H73 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10318&r=pbe |
| By: | Spencer Bastani |
| Abstract: | When deciding on the social desirability of public investment, the cost of a project is sometimes adjusted by a factor known as the Marginal Cost of Public Funds (MCPF) which captures the cost of raising public funds through distortionary taxation. However, there is no scholarly consensus on either its definition or its quantification. The purpose of this paper is to provide a brief up-to-date guide to the theoretical background, practical application, and empirical quantification of the MCPF, taking into account some recent developments in the public finance literature. |
| Keywords: | benefit-cost analysis, public investment, excess burden, distortions, public goods, taxes |
| JEL: | D61 H41 H53 H21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10322&r=pbe |
| By: | Rida BELAHOUAOUI (UCA - Université Cadi Ayyad [Marrakech]); El Houssain ATTAK (UCA - Université Cadi Ayyad [Marrakech]) |
| Abstract: | Tax revenue mobilization remains one of the most pressing issues, especially for developing countries, as it is an important driver for the achievement of sustainable development goals. Consequently, developing countries, whose main source of financing is tax revenue, are constantly seeking to increase the level of these resources, leading to an increase in the tax burden that affects taxpayers' behavior. The objective of this article is to analyze the relationship between tax burden and taxpayer compliance through a review of the theoretical literature. Indeed, the consequences of the tax burden on taxpayers' compliance have been the subject of much research since the 14th century. According to most economists, the tax burden has a negative impact on taxpayer compliance. Ibn Khaldun showed that an ever-increasing tax burden has a direct and negative impact on taxpayers' compliance. For his part, Laffer illustrated that, due to the rational expectations of economic agents, any increase in the tax rate beyond the optimal level reduces taxpayer compliance. According to the comparative treatment model, the tax compliance rate decreases when a taxpayer perceives that his tax burden is higher than that of other taxpayers in the same group. The results of this review of the theoretical literature confirm that the tax burden is related to taxpayer compliance, so that there is a level of tax burden above which taxpayers develop tax evasion behavior. |
| Abstract: | La mobilisation des recettes fiscales reste l'une des questions les plus pressantes, surtout pour les pays en développement, car elle constitue un moteur important pour la réalisation des objectifs de développement durable. Par conséquent, les pays en développement, dont les recettes fiscales constituent la principale source de financement, cherchent constamment à accroître le niveau de ces ressources, ce qui entraîne une augmentation de la pression fiscale qui affecte le comportement des contribuables. L'objectif de cet article est d'analyser la relation entre la pression fiscale et la conformité des contribuables à travers une revue de la littérature théorique. En effet, les conséquences de la pression fiscale sur la conformité des contribuables ont fait l'objet de nombreuses recherches depuis le 14ème siècle. Selon la plupart des économistes, la pression fiscale a un impact négatif sur la conformité des contribuables. Ibn Khaldoun a montré qu'une pression fiscale toujours plus lourde a un impact direct et négatif sur le respect des règles par les contribuables. Pour sa part, Laffer a illustré que, en raison des anticipations rationnelles des agents économiques, toute augmentation du taux d'imposition au-delà du niveau optimal réduit la conformité des contribuables. Selon le modèle du traitement comparatif, le taux de conformité fiscale diminue lorsqu'un contribuable perçoit que sa pression fiscale est plus élevée que celle des autres contribuables du même groupe. Les résultats de cette revue de la littérature théorique confirment que la pression fiscale est liée à la conformité des contribuables, de sorte qu'il existe un niveau de pression fiscale au-delà duquel les contribuables développent un comportement d'évasion fiscale. |
| Keywords: | Tax burden, Tax compliance, Taxpayers, Determinants., Pression fiscale, Conformité fiscale, Contribuables, Déterminants. |
| Date: | 2022–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03955121&r=pbe |
| By: | Antoine Bozio (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Thomas Breda (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Julien Grenet (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Arthur Guillouzouic (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IPP - Institut des politiques publiques) |
| Abstract: | We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find a limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by empirical evidence to date. |
| Keywords: | Tax- Benefit Linkage, Social Security Contributions, Tax Incidence, Payroll Tax |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ipppap:halshs-02191315&r=pbe |
| By: | Torben M. Andersen |
| Abstract: | Within the frame of the Nordic welfare model, pension system design has taken very different routes. While the overall aims in terms of distribution and replacement rates are similar, the division of labour between defined benefit and contribution as well as pay-as-you-go versus funded schemes differs significantly. The main characteristics of the pension systems in the Nordic countries are presented, and outcomes relating to pension adequacy in terms of poverty and replacement rates are discussed. Specific design issues related to achieving distributional goals and financial robustness via automatic adjustment mechanisms are highlighted. Finally, the overall financial sustainability of pension systems and the macroeconomic implications are discussed. |
| Keywords: | pension systems, pension adequacy, fiscal sustainability, distribution, insurance, incentives |
| JEL: | G51 H60 J26 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10321&r=pbe |
| By: | Jose Valderrama; Javier Olivera |
| Abstract: | We study the effects of Peru’s social pension programme Pension 65 on mortality. The programme provides a lifetime pension equivalent to 32 US dollars per month to individuals aged 65 and older who do not have other pensions and are officially classified as extreme poor. The analysis relies on survey data obtained at the baseline, which we match to mortality records for the period 2012 to 2019. We exploit the discontinuity around the welfare index used by the programme to determine eligibility, and estimate intention-to-treat effects in a regression discontinuity setting. We find that after seven years, the programme can reduce mortality among eligible people by about 11.4 percentage points. The programme could also increase the life expectancy of eligible people by one year. The results and back-of-the-envelope calculations indicate that the policy is cost effective. |
| Keywords: | non-contributory pensions; mortality; regression discontinuity; old-age poverty |
| JEL: | H55 I38 J14 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2023-05&r=pbe |
| By: | Hillberry, Russell; Nguyen, Nhu |
| Abstract: | The rapid growth of utility-scale wind energy generation is a potentially important boon to rural economies in the United States. Yet econometric estimates suggest that the local economic benefits of wind energy generation have been modest, perhaps because the sector is capital-intensive and financed almost exclusively by external capital. In this paper we argue that a) both the presence of a critical - but unpaid - factor of production (the wind) and generous federal subsidies are quantitatively important sources of economic rent, and b) a large portion of these rents accrue to providers of capital who reside outside the local economy. We build a partial equilibrium model that illustrates the mechanisms that generate economic rent, and integrate it into a small open economy general equilibrium model of a county’s economy. We calibrate the partial and general equilibrium models to data from two rural counties in Indiana, quantify the economic rents, and consider the consequences of a resource rent tax. Resource rent taxes generate significantly larger economic benefits for communities that host wind power, and offer an opportunity to spread the sector’s economic benefits more broadly within them. Broadly distributed revenues from resource rent taxes might facilitate greater acceptance of utility scale wind power in communities where the sector would otherwise be unwelcome. State public utility commissions provide an analytical infrastructure that could support local taxation of the kind that we consider. |
| Keywords: | Land Economics/Use, Agricultural and Food Policy |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ags:pugtwp:333477&r=pbe |