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on Public Economics |
| By: | Klara Kinnl (Department of Economics, Vienna University of Economics and Business); Urlich Wohak (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | We study price and volume effects of VAT reductions for period products. We exploit varying treatment intensities and timing in several European countries and find that in response to a one percentage point reduction in the VAT, prices decrease by 0.55% in the following 12 months. Pass-through rates range from full pass-through to over-shifting 12 months post policy change, with low-income households benefiting the most. While the average effect on aggregate purchase volumes is statistically zero, low income households’ demand is stimulated. We find evidence that households purchase higher quality products as a result of the tax reform. |
| Keywords: | tax pass-through, VAT reduction, tampon tax, scanner data, tax incidence |
| JEL: | H2 H31 H22 D12 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp356&r=pbe |
| By: | Can, Ege (University of Nevada, Reno); Fossen, Frank M. (University of Nevada, Reno) |
| Abstract: | We investigate the effect of personal income tax (PIT) rates on the number of hours entrepreneurs work weekly. Using the rotating panel data from the Annual Social and Economic Supplement of the Current Population Survey from 2003 to 2019, we estimate instrumental variable regressions in first differences to exploit changes in the tax code for identification. We distinguish between self-employed owners of incorporated versus unincorporated businesses and examine their differential responses. The findings reveal that higher individual-specific marginal PIT rates increase the hours worked among entrepreneurs with incorporated businesses, which could be explained by the availability of tax avoidance strategies. Among unincorporated entrepreneurs, we find a significant response to PIT rates in hours worked only for those who work 50 or more hours per week. |
| Keywords: | income taxes, entrepreneurship, self-employment, labor supply, incorporated, unincorporated |
| JEL: | H24 H25 J22 J23 L26 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16683&r=pbe |
| By: | Garstenauer, Viola; Siassi, Nawid |
| Abstract: | In this paper, we examine reforms that alleviate large employment disincentives induced by child-related transfers for married mothers. We develop a life-cycle model where married couples face labor market, child care and fertility risk, and make joint labor supply and consumption-saving decisions. The evolution of female human capital is endogenous and shaped by mothers’ employment decisions. We calibrate the model to the U.S. using data from the Current Population Survey. We show that participation tax rates exceed 25 percent for most mothers in our sample, and can be as high as 60 percent when including child care expenses. We then evaluate reforms to existing tax credits for working couples. We find that (i) expanding child care tax credits and (ii) introducing a secondary earner EITC deduction lead to substantially higher employment rates among married mothers. Both reforms are easily implementable, self-financing, and welfare-improving. A combination of both reforms closes the maternal employment gap altogether. |
| Keywords: | Family labor supply, Child-related transfers, Income taxation |
| JEL: | H24 H31 J12 J22 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuweco:281162&r=pbe |
| By: | Yugang Tang (School of Economics, Shandong University, Zhixin Building, Room B312, 27 Shanda Nanlu, 250100); Zhihao Su (Shandong University, No. 27 Shanda South Road, Jinan City, Shandong Province, China: 250100); Yilin Hou (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Zhendong Yin (School of Economics, Central University of Finance and Economics, No. 39 Xueyuan South Road, Haidian District, Beijing, 102206) |
| Abstract: | This paper examines the fiscal motives behind municipal governments' decisions to allocate commercial and residential land when two categories of land use are subject to different fiscal revenue alternatives: business-related tax and/or land rent. We use urban parcel-level land transfers during China’s peak period of urbanization, match commercial parcels with residential parcels, and find significant price discounts on commercial parcels relative to adjacent residential parcels. The observed discounts arise from the future tax flows from commercial use, i.e., expected taxes from developed commercial land reduce its transfer price. We conduct a structural estimation to examine the implications on land use structure of future taxes lowering land transfer prices. Results show that while prospective taxes increase commercial land supply, a significant portion of the favorable treatment impact is mitigated by market price responses, suggesting that the land market counters commercial land favoritism when local revenues include both business-related taxes and land value-based charges. The results have implications for the design of urban public revenue systems. |
| Keywords: | Fiscal incentives; Land transfer; Spatial matching; Land use |
| JEL: | O18 P48 R12 R31 R38 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:262&r=pbe |
| By: | Ravi Kanbur (Cornell University); Matti Tuomala (Tampere University and Finnish Centre of Excellence in Tax Systems Research (FIT)) |
| Abstract: | This paper presents an analysis of the consequences for redistribution policies of achieving a more equal predistribution, that is, a more equal distribution of the predetermined income earning capabilities that individuals bring to the market. We show that optimal fiscal policies are less redistributive when the predistribution is more equal. We then quantify the value of a more equal predistribution. We show that total consumption is higher with a more equal predistribution. We also develop a money metric measure of social welfare and show that a more equal predistribution increases this measure for a Utilitarian and Prioritarian Social Welfare Function but may decrease it for the Maximin. |
| Keywords: | Predistribution, Redistribution, Optimal Non-linear Taxation, Marginal Tax Rates, Social Welfare Function |
| JEL: | D31 H21 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:fit:wpaper:19&r=pbe |
| By: | Christian M{\o}ller Dahl; Nadja van 't Hoff; Giovanni Mellace; Sinne Smed |
| Abstract: | In October 2011, Denmark introduced the world's first and, to date, only tax targeting saturated fat. However, this tax was subsequently abolished in January 2013. Leveraging exogenous variation from untaxed Northern-German consumers, we employ a difference-in-differences approach to estimate the causal effects of both the implementation and repeal of the tax on consumption and expenditure behavior across eight product categories targeted by the tax. Our findings reveal significant heterogeneity in the tax's impact across these products. During the taxed period, there was a notable decline in consumption of bacon, liver sausage, salami, and cheese, particularly among low-income households. In contrast, expenditure on butter, cream, margarine, and sour cream increased as prices rose. Interestingly, we do not observe any difference in expenditure increases between high and low-income households, suggesting that the latter were disproportionately affected by the tax. After the repeal of the tax, we do not observe any significant decline in consumption. On the contrary, there was an overall increase in consumption for certain products, prompting concerns about unintended consequences resulting from the brief implementation of the tax. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.11481&r=pbe |
| By: | Asmae AQZZOUZ; Nathalie PICARD |
| Abstract: | This study examines the influence of local taxes on household migration behavior between French municipalities (“communes”). We group households into five tenure status categories and four categories of household head age. Our findings support Tiebout "voting with feet" theory, especially among young flat renters in the private sector and flat owners. A surprising result is related to the introduction of the municipality size in the regression which dramatically affects the coefficient measuring the effect of local tax rates on migration probability. This suggests that a large part of the “Tiebout effect” usually found in the literature is an artefact caused by the spurious correlation between municipality size and local tax rates. |
| Keywords: | Residential mobility, local taxes, local public expenditures, heterogeneity, local amenities, life cycle. |
| JEL: | H71 H72 R23 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2023-43&r=pbe |
| By: | Behringer, Jan; Dräger, Lena; Dullien, Sebastian; Gechert, Sebastian |
| Abstract: | We use novel German survey data to investigate how perceptions and information about public finances influence attitudes towards public debt and fiscal rules. On average, people strongly underestimate the debt-to-GDP ratio, overestimate the interest-to-tax-revenue ratio and favor a tighter German debt brake. In an information treatment experiment, people consider public debt to be a more (less) severe problem once they learn the actual debt-to-GDP or interest-to-tax-revenue ratio is higher (lower) than their estimates. However, the treatment effects partly vanish when anchoring respondents' beliefs with historical public debt figures. We find no treatment effects on attitudes towards the debt brake. |
| Keywords: | public debt, fiscal rules, information treatment, expectations |
| JEL: | E60 D83 H31 H60 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-715&r=pbe |
| By: | Kamil Aliyev (Graduate School of Economics, Osaka University) |
| Abstract: | This paper sets a small open economy model in which the government can raise the efficiencies of production and extraction of a non-renewable natural resource by spending the budget raised through income tax. Using this model, we examine the optimal government expenditure on the production technology and that on the extraction technology. The results are as follows. If revenue of natural resource is high, the optimal expenditure on the extraction technology is high, while the optimal expenditure on production technology is independent of the natural resource revenue. Moreover, if the ratio of the optimal expenditure for improvement of extraction technology to the resource revenue is higher (lower) than the optimal tax rate under the depletion of the natural resource, the optimal tax rate before the depletion is higher (lower) than that after the depletion. |
| Keywords: | non-renewable natural resource, labor productivity, optimal tax, small open economy |
| JEL: | H21 H54 O41 Q32 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2401&r=pbe |
| By: | Adrien Fabre (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) |
| Keywords: | Preferences for redistribution, Desired tax, Income tax rates, Income distribution, France |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01955521&r=pbe |