|
on Public Economics |
| By: | James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (School of Economics and Finance, Queen Mary, University of London); Paolo Surico (London Business School and CEPR) |
| Abstract: | Using a narrative identi cation of tax changes in the United States over the post-WWII period, we document that a temporary cut in corporate income tax rates leads to a long-lasting increase in innovation and productivity, whereas changes in personal income tax rates only have short-term e ects. We show that the results on corporate taxes are consistent with theories of endogenous growth that feature tax amortisation allowances on intellectual property purchases, as in the tax code of most countries in the world. In contrast, personal taxes work primarily through the response of labour supply, which is as transient as the tax change itself. |
| Keywords: | corporate taxes, narrative identi cation, TFP, R&D, technological adoption. |
| JEL: | E23 E62 O32 O34 O38 |
| Date: | 2024–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:979&r= |
| By: | Spencer Bastani; Daniel Waldenström |
| Abstract: | This paper examines the implications of Artificial Intelligence (AI) and automation for the taxation of labor and capital in advanced economies. It synthesizes empirical evidence on worker displacement, productivity, and income inequality, as well as theoretical frameworks for optimal taxation. Implications for tax policy are discussed, focusing on the level of capital taxes and the progressivity of labor taxes. While there may be a need to adjust the level of capital taxes and the structure of labor income taxation, there are potential drawbacks of overly progressive taxation and universal basic income schemes that could undermine work incentives, economic growth, and long-term household welfare. Some of the challenges posed by AI and automation may also be better addressed through regulatory measures rather than tax policy. |
| Keywords: | AI, automation, inequality, labor share, optimal taxation, tax progressivity |
| JEL: | H21 H30 O33 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11084&r= |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University) |
| Abstract: | The wage-increase promotion tax system was introduced in the 2013 tax reform. It is an internationally unique system that aims to increase wages through corporate tax credits. This study focuses on the "hidden subsidies" and excess burdens necessary to make policy decisions about the wage-increase promotion tax credits. The study incorporated the wage-increase tax system into a firm-behavior model for analyzing corporate taxation to present the "implied wage-increase subsidy rate" concept as an indicator of a subsidy’s extent and scope, and a method for measuring the excess burden. It measures the "implied wage-increase subsidy rate" and excess burden using financial data for individual firms. First, the "implied wage-increase subsidy rate" indicates that the wage-increase promotion tax system has expanded the subsidy’s extent and scope. Second, the wage-increase promotion tax credits increase the producer surplus of applicable firms but exponentially increase the excess burden, which is social loss. Third, no significant difference is found in the changes in labor productivity between applicable and non-applicable firms. Global corporate tax reform tends to lean toward a neutral tax system, and the wage-increase promotion tax system may not fit this trend. |
| Keywords: | wage-increase promotion tax system, implied wage-increase subsidy, excess burden |
| JEL: | H25 H87 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:271&r= |
| By: | Vidar Christiansen; Odd E. Nygård |
| Abstract: | The paper discusses the tax treatment of commuting where wages and housing cost vary across locations. An income tax distorts the locational choices of agents, who dislike commuting and have preferences for place of residence Wages, housing cost and commuting cost determine how subsidising or taxing commuting affects behaviour and social efficiency. A subsidy encourages commuting and induces agents to choose a more favourable living place. The analysis clarifies the circumstances in which the subsidy alleviates or exacerbates the tax distortions, also where housing is tax favoured, as is often the case. The distributional impact depends on the effects of wages on commuting. An empirical illustration based on Norwegian data shows how one can infer efficiency effects of responses to subsidies on commuting. |
| Keywords: | income tax, commuting, commuter cost, subsidies on commuting, place of residence |
| JEL: | H21 H24 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11080&r= |
| By: | Andreas Haufler; Hayato Kato |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the effects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform to a split corporate tax rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative effects of introducing a $15\%$ GMT rate in a calibrated version of our model. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.14302&r= |
| By: | Francesco Capozza; Krishna Srinivasan |
| Abstract: | Evaluating the desirability of a reform typically involves weighing the gains of the winners against the losses of the losers using welfare weights. Welfare weights measure the value that citizens assigns to a $1 gain in consumption to individuals. They can capture various normative ideals like utilitarianism and equality of opportunity. What are the welfare weights that citizens assign to individuals in society? We develop a portable method to elicit welfare weights from general population samples and validate it using two experiments. We find that the general population weights are more progressive than the weights implied by tax and transfer policies in the U.S., indicating that the general population desires additional redistribution. The general population weights are less progressive than those frequently used in the literature. We explore the implications of these weights for optimal income taxes. |
| Keywords: | welfare weights, policy views, income taxation |
| JEL: | C93 D31 H23 I31 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11086&r= |
| By: | Kimberly A. Clausing (Peterson Institute for International Economics); Mary E. Lovely (Peterson Institute for International Economics) |
| Abstract: | At the beginning of its history, the United States relied on tariffs--taxes on imported goods--as its major source of government revenue. That changed starting in the early 20th century, with the enactment of the federal income tax and the advent of a new consensus recognizing tariffs as regressive, burdening the working class while leaving untaxed much of the income accruing to the wealthy. At present, less than 2 percent of government revenue in high-income countries comes from import taxes. Today, however, the United States may be on the cusp of reverting to an antiquated approach to funding its government. Presidential candidate Donald Trump is proposing to reduce US reliance on income taxes while increasing our reliance on import tariffs. He proposes extending expiring tax cuts from 2017 and has also suggested possible new rounds of tax cuts. At the same time, he has proposed a ten percent "across- the -board" tariff and a 60 percent or more tariff on imports from China. Together, these policy steps would amount to regressive tax cuts, only partially paid for by regressive tax increases. The tariffs would reduce after-tax incomes by 3.5 percent for those in the bottom half of the income distribution and cost a typical household in the middle of the income distribution about $1, 700 in increased taxes each year. If executed, these steps would increase the distortions and burdens created by the rounds of tariffs levied during the first Trump administration (and sustained during the Biden administration), while inflicting massive collateral damage on the US economy. This Policy Brief leverages recent research to provide approximate calculations for the cost of the higher proposed tariffs to US consumers, considering the distribution of these costs across US households and the consequences for US federal revenues. In sum, Trump's tax proposals entail sharply regressive tax policy changes, shifting tax burdens away from the well-off and toward lower-income members of society while harming US workers and industries, inviting retaliation from trading partners, and worsening international relations. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb24-1&r= |
| By: | Ken Tabata (School of Economics, Kwansei Gakuin University) |
| Abstract: | This paper analyses the effects of resource taxation policies aimed at sustainable use of resources on economic growth and consumption inequality using an R&D-based growth model with heterogeneous households. Resource taxes affect the extraction rate of non-renewable resources only if the tax rate changes over time. This paper shows that the lower growth rate of the ad valorem tax on resource use slows resource extraction and promotes economic growth but increases consumption inequality. If resource tax policies are to promote economic growth without increasing consumption inequality, resource tax revenues must be allocated for redistributive purposes. This paper also calibrates the model for quantitative analysis and finds that the lower growth rate of the tax on resource use causes a non-negligible increase in consumption inequality. |
| Keywords: | Non-renewable resources, Endogenous growth, Consumption inequality, R&D |
| JEL: | E62 H23 O30 Q32 Q38 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:272&r= |
| By: | Tselios, Vassilis; Rodriguez-Pose, Andres |
| Abstract: | Poverty reduction and the tackling of social exclusion are overarching goals of development and welfare policies. This paper explores the extent to which decentralization contributes to poverty and social exclusion alleviation in European countries and regions. We find evidence that increases in central government transfers of political, administrative and fiscal authority to subnational tiers of government reduce poverty and address social exclusion at the national level. This, however, mainly happens in countries with a high degree of governance quality and, fundamentally, in urban areas. The link between decentralization and poverty and social exclusion alleviation is more uniform at the regional level, as greater regional autonomy is connected to lower poverty and social exclusion, regardless of the quality of regional government. Hence, when regional governments have the capacity to design their own independent policies, a reduction of poverty and social exclusion and improvements in well-being generally ensue. |
| Keywords: | decentralisation; poverty; social exclusion; quality of governance; urban areas; Europe; decentralization; Membership Research Grant (MeRSA) |
| JEL: | H11 H53 I32 R11 |
| Date: | 2022–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115545&r= |
| By: | Nazare da Costa Cabral; Noemia Goulart |
| Abstract: | The Social Security Financial Stabilisation Fund (FEFSS) is a crucial instrument for the sustainability of the Portuguese Social Security system. This study provides an in-depth analysis of the FEFSS, with the aim of clarifying its nature and goals by comparing its distinctive features with other national and international funds. Understanding the evolution of Portuguese state's main financial reserve necessarily involves analysing the evolution of its financing sources and the investment policy adopted over time to promote financial return and assessing how these have accompanied the structural changes that have taken place in the social security system. The analysis highlights the important role that FEFSS plays as a Government lender and in the public assets management, through various interactions that have impact on public accounts. The study also addresses aspects related to the fund's governance, considering good practices and highlighting the importance of strengthening transparent and professional management. From this analysis, the authors conclude that there is a need to reform and strengthen the FEFSS legal regime, applicable both in the accumulation and phasing out and, especially with regard to the latter, the need to set explicit conditions for the use of the fund, preventing discretion and (bad) arbitrariness. |
| Keywords: | fundos de reserva, FEFSS, sustentabilidade, política de investimento, capitalização, rentabilidade, repressão financeira, pensões |
| JEL: | G01 G11 G20 H55 H63 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:alf:opaper:2024-02&r= |