|
on Public Economics |
| By: | José M. Domínguez; Carmen Molina; Ana Patricia Montes |
| Abstract: | The purpose of this paper is to analyse the tax proposal made in the United States for the taxation of billionaires, which introduces elements of the concept of income in the Schanz-Haig-Simons tradition. In particular, attention is paid to the tax treatment of unrealised capital gains, which marks an important difference between the different personal income tax models. The theoretical background is reviewed, the problems of its practical application are also addressed, and a quantitative comparison of the implications of recurrent and deferred taxation options is made. |
| Keywords: | personal income tax, billionaires tax, Haig-Simons model. |
| JEL: | H24 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03262024&r= |
| By: | Enea Baselgia; Isabel Z. Martínez |
| Abstract: | We use a novel rich-list data set to estimate the sensitivity of the location choice of superrich foreigners to a special tax regime, under which wealthy foreigners are taxed on their living expenses, rather than their true income and wealth. We are the first to evaluate this controversial Swiss policy, and show that when some Swiss cantons abolished this practice, their stock of super-rich foreigners dropped by 43% as a consequence. We find no response for the Swiss super-rich, who were unaffected by the policy change. |
| Keywords: | super-rich, location-choice, tax mobility, expenditure-based taxation, preferential taxation, tax competition |
| JEL: | H24 H71 H73 R23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11093&r= |
| By: | Berenice Anne Neumann; Niklas Scheuer |
| Abstract: | We study the effect of bequests and their taxation on wealth inequality. We allow for random death and birth in a continuous-time, dynastic framework. Individuals behave optimally and accumulate wealth over their lifetime. Bequests above a tax exemption threshold are taxed according to a fixed rate. We derive a stochastic differential equation modeling dynastic wealth and obtain an analytical expression for the coefficient of variation. By calibrating our model to German wealth data, we utilize these analytical results to project empirical wealth inequality across various bequest tax rates and tax exemption thresholds. Most notably, our results indicate that a combination of a high tax exemption threshold paired with a high bequest tax rate reduces wealth inequality strongest when considering revenue-neutral alterations. |
| Keywords: | wealth, bequest, taxation, wealth inequality, analytical solution |
| JEL: | D31 E21 H24 |
| Date: | 2025 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:202405&r= |
| By: | Philippe Aghion; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva |
| Abstract: | We use individual panel data and the introduction of simpler tax regimes for the self-employed in France to assess the extent to which individuals' shift towards the simpler tax regimes is driven by tax simplicity and by tax evasion motives. We find evidence of a quest for simplicity from estimating the amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes, and from observing that bunching is increasing in the degree of simplicity of the tax regime. We argue that tax evasion plays a significant role in explaining individuals' attraction towards simpler tax regimes. We develop a structural model to quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. The model suggests a considerable preference for tax simplicity, ranging from 162 to 5654 euros per year per self-employed individual, which in turn entails a sizeable evasion elasticity. |
| Keywords: | self-employment, taxation, entrepreneurship |
| Date: | 2024–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1999&r= |
| By: | Berliant, Marcus; Boyer, Pierre |
| Abstract: | This paper begins with a survey of the literature on the political economy approaches to labor income taxation. We focus on recent progress made by examining in detail the specific properties of non-linear taxes derived in the context of voting. Next, we present new results on the existence of majority voting equilibrium that unify work in the standard framework. Finally, we discuss how recent theoretical results help us uncover empirical patterns from the last 50 years in the US tax system, namely a sharp decrease in top marginal tax rates, the rise of the Earned Income Tax Credit (EITC), and increased progressivity in the middle of the income distribution. |
| Keywords: | Non-linear income taxation; Tax reform; Political economy; Optimal taxation; EITC |
| JEL: | C72 D72 D82 H21 |
| Date: | 2024–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120864&r= |
| By: | d'Andria, Diego |
| Abstract: | We study the relationship between tax progressivity and the size of the R&D workforce, using a panel of European countries in 2000-2019. We review the theoretical literature which provides opposing predictions about such a relationship. We then demonstrate that such relationship exists as a "within" effect, it is negative, meaning that a larger tax progressivity is associated with smaller shares of employment in R&D activities, and it remains statistically significant after performing a number of robustness tests. Differently to previous studies based on patenting inventors, we find no effect due to top tax rates on the size of R&D employment. |
| Keywords: | Tax progressivity; R&D; Labour force structure |
| JEL: | H24 J21 J24 O3 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120937&r= |
| By: | Christine L. Dobridge; Joanne W. Hsu; Mike Zabek |
| Abstract: | We estimate the effects of personal income tax decreases on financial well-being, including qualitative subjective assessments and quantitative measures. A plausibly causal design shows that tax decreases in the Tax Cuts and Jobs Act made survey respondents more likely to say they were "living comfortably" financially, with null effects at lower levels of subjective financial well-being. Estimates from a similar design using credit bureau data show that people who had larger tax decreases were modestly more likely to open new accounts, and more likely to have higher consumer credit balances. Tax decreases had effects on credit scores that are indistinguishable from zero. Results suggest that larger tax decreases improve financial well-being in ways not fully proxied by typical administrative data. |
| Keywords: | Taxes; Subjective well-being; Household finances; Credit; Financial well-being |
| JEL: | H24 G50 I31 |
| Date: | 2024–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-29&r= |
| By: | Patrice Pieretti (DEM, Université du Luxembourg); Giuseppe Pulina (Banque Centrale du Luxembourg); Andreas Sintos (DEM, Université du Luxembourg); Skerdilajda Zanaj (DEM, Université du Luxembourg) |
| Abstract: | In this paper, we model migration patterns as the outcome of strategic public policies adopted by competing jurisdictions. We assume that two economies, distinguished by different technological levels, host a continuum of mobile individuals with varying skill levels. To maximize their net revenues, governments compete for mobile workers by taxing wages and providing a public good that enhances firm productivity (public input). We show that the most skilled workers migrate to the technologically advanced economy. However, by offering lower taxes or more public inputs, the less technologically developed country can retain part of its skilled labor force and attract skilled workers from abroad, albeit not the most qualified. As a result, a two-way migration pattern emerges, driven by governments’ strategic policy choices. Finally, the introduction of heterogeneity in population size does not significantly alter the results. |
| Keywords: | Bilateral migration; Tax competition; Heterogeneous skills; Technological gap; Policy competition. |
| JEL: | H20 H30 H54 H87 F22 F60 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:24-04&r= |
| By: | António Afonso; José Alves; João Tovar Jalles; Sofia Monteiro |
| Abstract: | This paper explores the nuanced relationship between fiscal decentralization and fiscal sustainability. Employing panel data analyses, it scrutinizes how decentralization influences fiscal discipline across different governmental levels. Results for 185 countries show that while tax decentralization often hampers the degree of fiscal responsiveness, potentially due to misaligned local and national objectives and loss of scale efficiency, spending decentralization can enhance fiscal outcomes by promoting efficient resource allocation. These findings are contextualized within a broad range of economic and political environments, highlighting that the impacts of decentralization are contingent upon local capacities and overarching governance frameworks. Hence, we contribute to the understanding of fiscal policies’ complexity in decentralized systems and offer significant policy insights for fiscal sustainability in varied administrative contexts. |
| Keywords: | panel data analysis; fiscal sustainability; decentralization; fiscal rules; political cycles; time-varying coefficients. |
| JEL: | H11 H77 H72 H73 E62 C23 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03242024&r= |
| By: | MAEBAYASHI, NORITAKA |
| Abstract: | This study investigates the effect of public debt on growth, interest rate, and sustaibility of public debt in a very simple endogenous growth model with financial imperfection and the firm heterogeneity. Increases in public debts cause higher real interest rates through financial markets and reduces both the number of firms and private investment, leading to lower long-run growth. It makes public debt less sustainable when public debt is very large. This study also examine the effect of investment subsidy financed by public debt. It hinder economic growth in the long-run although they affect posively on growth in the short run. Therefore, investment subsidy should not be financed by public debt but tax increases. |
| Keywords: | Sustainability of public debt, Finantial frictions, Firm heterogeneity, Investment subsidies |
| JEL: | E62 H20 H60 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120884&r= |
| By: | Jesse Lastunen; Antoine de Mahieu; Katrin Gasior; H. Xavier Jara; Jukka Pirttilä |
| Abstract: | This paper analyses the effectiveness of tax-benefit systems in reducing poverty and inequality across 13 countries in the Global South. Using national survey data and tax-benefit microsimulation models from the SOUTHMOD project, we provide a cross-country perspective on the redistributive impact of fiscal policies. Our analysis involves decomposing the sources of disposable income across the income distribution and estimating the contributions of different policy instruments to poverty and inequality. |
| Keywords: | Tax-benefit systems, Microsimulation, Poverty, Inequality, Social protection, Gender |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-35&r= |
| By: | Jinwon Kim (Department of Economics, Sogang University, Seoul, Korea); Jucheol Moon (Department of Computer Engineering & Computer Science, California State University, Long Beach); Dongyun Yang (Department of Economics, The University of Texas, Austin) |
| Abstract: | This paper quanti_es the optimal Pigouvian congestion tolls imposed on California freeway users and the associated welfare gains by estimating the technological supply relationship of roads and the time-cost elasticity of demand using novel identi_cation strategies and big data. Based on our estimates, we suggest that the optimal congestion tolls are around 10-16 cents per vehicle mile under moderate congestion and 25-114 cents under severe congestion, with the amounts varying by freeway depending on road capacity and tra_c demand size. We calculate that the welfare bene_ts from the tolling are typically around USD 20 per lane-mile of road and hour. Under a plausible scenario, the optimal tolls charged on congested freeways in California yield annual aggregate bene_ts of up to USD 1.8 billion. |
| Keywords: | Pigouvian tax, congestion externality, California freeway, quasi experiment, instrumental variable, big data |
| JEL: | R41 H23 Q59 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:sgo:wpaper:2402&r= |
| By: | Lorenzo Carbonari (CEIS & DEF, University of Rome "Tor Vergata"); Alessio Farcomeni (CEIS & DEF, University of Rome "Tor Vergata"); Filippo Maurici (DEF, University of Rome "Tor Vergata"); Giovanni Trovato (CEIS & DEF, University of Rome "Tor Vergata") |
| Abstract: | Using data from 16 OECD countries over the period 1981-2011, this paper studies how different policy announcements affect economic growth in situations of fiscal consolidation. We focus on government announcements regarding reductions in expenditure and increases in taxation. We use a mediation analysis to uncover the direct and indirect effects elicited by such announcements. We find that during debt consolidation periods, announcements related to consolidation plans have no direct impact on GDP growth. However, spending cuts announcements have substantial negative indirect effects, resulting in overall negative total effects, while tax increases have negligible indirect and overall impacts. Our findings propose a new interpretation of the results of Alesina et al. (2015b): in terms of announcements, once accounting for indirect effects, spending cuts are more harmful to growth than tax hikes. |
| Keywords: | fiscal adjustment, economic growth, causal mechanisms, mediation analysis |
| JEL: | E60 H60 H63 |
| Date: | 2024–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:578&r= |
| By: | Reyer Gerlagh; Etienne Lorang |
| Abstract: | We develop a framework for the representation of material flows in competitive equilibrium. Material balances track material flows, which adjust endogenously to economic transactions. We assume negative environmental effects of resource extraction and waste deposition and show that taxing resource extraction restores efficiency. Taxing waste, where generated, only restores efficiency if producers minimize users’ costs of their products, or if there is a dense set of goods with varied material content. We set up the general model structure and use a stylized 3-sector model for illustration. Finally we develop a quantitative stylized assessment of global steel and fossil fuel use. |
| Keywords: | material balances, material policies, waste policies, upstream versus downstream |
| JEL: | H21 Q29 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11091&r= |
| By: | António Afonso; José Carlos Coelho |
| Abstract: | We assess the drivers of fiscal sustainability in 20 OECD economies between 1950 and 2019. We find stable long-term relationships between government revenues and expenditures as well as between the primary budget balance and past public debt ratio for the full panel. Performing an expanding window analysis, we conclude that the differential between the long-term real interest rate and the real GDP growth rate (r-g) plays a crucial role in fiscal sustainability, as well as the existence of fiscal rules in terms of the budget balance, and also the output gap. The effects of inflation, external accounts balance and fiscal rules on sustainability coefficients à la Hakkio and Rush (1991) and Bohn (1998) are heterogenous. Furthermore, before the global financial crisis of 2008, the effects of the (r-g) differential were particularly strong, and depended on its sign as well as on past debt-to-GDP ratios. |
| Keywords: | fiscal sustainability; primary budget balance; public debt; panel data; expanding window; fiscal rules. |
| JEL: | C23 H61 H63 E62 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03252024&r= |