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on Public Economics |
| By: | Matias Giaccobasso (VATT Institute for Economic Research); Brad Nathan (Rutgers University); Ricardo Perez-Truglia (University of California, Los Angeles); Alejandro Zentner (University of Texas at Dallas) |
| Abstract: | Do perceptions about government spending affect willingness to pay taxes? We test this hypothesis with a natural field experiment that focuses on the allocation of property taxes to public schools. Our results show that taxpayers often misperceive the destination of their tax dollars. By introducing shocks to households’ perceptions via an information-provision experiment, we find that perceptions of how tax dollars are used significantly affect the probability of filing a tax appeal. Moreover, the effects are consistent with reciprocal motivations: individuals are more willing to pay taxes if they believe that the government services funded by those taxes will provide greater personal benefit. |
| Keywords: | taxes, protest, public services, education, redistribution |
| JEL: | C93 H26 I22 K34 K42 Z13 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:fit:wpaper:28 |
| By: | Tommaso Giommoni; Enrico Rubolino |
| Abstract: | This paper studies the impact of tax incentives on economic behavior within the household. We focus on an Italian tax policy that grants a large tax credit to main earners if their spouses, designated as “dependent spouses” by the tax law, report income below a certain threshold. Combining a novel administrative dataset with a bunching approach, we find that second-earner women adjust their income to benefit from the tax credit, while second-earner men do not. Second-earner women holding more conservative gender norms are the ones who mostly reduce their income. This suggests that tax policies can exacerbate economic inequalities among families and depress female labor market outcomes when they interact with entrenched gender norms. |
| Keywords: | spouse tax credit, income taxation, gender norms, bunching, household behavior, female labor supply |
| JEL: | H24 H31 J16 J12 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11311 |
| By: | Massenz, Gabriella (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We study responsiveness of owner-managed companies to a corporate income tax kink using Dutch tax records linking firms to their owners. The corporate taxable income elasticity (CETI) is 0.08, but tax sensitivity is over three times higher for firms using specific investment deductions. These are generous, allow for large depreciation and include assets that can reflect owner-managers’ consumption. The CETI rises with deductions’ use and is higher for large firms in industries with easy access to them. We document persistence at the kink, which is driven by large firms using deductions and whose owner-managers repeatedly target personal income tax kinks. |
| Keywords: | Taxable income elasticity; Owner-managed companies; Tax deductions; Bunching |
| JEL: | H24 H25 H26 H30 |
| Date: | 2024–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1503 |
| By: | António Afonso; Ana Patricia Montes; José M. Domínguez |
| Abstract: | In this paper, we estimate the potential tax burden in a panel data set comprising OECD countries over the period 2000-2021. To this end, we use non-parametric and parametric techniques: Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA). In this way, it will be possible for us to identify which countries are close to their potential tax capacity and which are far from it. Moreover, we can determine whether they may sustain an increase (decrease) in their actual tax burden depending on whether the tax effort ratio is lower or higher relatively to other similar countries in the sample. Non-parametric and parametric results coincide rather closely on the positioning of the countries vis-à-vis the production possibility frontier and on their relative distances to the frontier. Efficient countries most of the times are: Belgium, Colombia, Finland, France, Italy, Latvia, Slovak Republic, and Sweden. |
| Keywords: | OECD, tax burden, tax efficiency, Stochastic Frontier Analysis, Data Envelopment Analysis |
| JEL: | C14 C23 H20 H21 H30 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11333 |
| By: | Stylianos Asimakopoulos; James Malley; Apostolis Philippopoulos |
| Abstract: | This paper presents a novel study on the significance of corporate payout policy in shaping firms financial decision-making and, in turn, the macroeconomy. To this end, we add to the literature by allowing households and firms to choose share buybacks optimally. We then explore the implications of various shocks commonly facing them, such as dividend income, investment, and tax shocks. The latter include corporate income, capital gains, and dividend income taxes. We find that the model predictions cohere well with the data when applying the non-policy shocks. We also find that tax reform's aggregate and welfare e¤ects are overstated when share buybacks are not optimally chosen as assumed in the relevant literature. |
| Keywords: | dividends, share repurchases, tax reforms, payout exibility |
| JEL: | C68 E62 G30 G35 H25 H30 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:gla:glaewp:2024_13 |
| By: | Touhami Abdelkhalek; Dorothee Boccanfuso |
| Abstract: | Public policies, particularly those related to taxes and subsidies, should help to reduce poverty and inequality. However, the combination of components of these two systems, as implemented, leads sometimes to an increase in poverty and or inequality without being necessarily anticipated. In this policy brief, based on data from the 2019 wave of the Enquête Panel de Ménage from the Observatoire National du Développement Human from Morocco, we first highlight the influence of taxes and subsidies on household incomes. We derive the income variations relating to the tax burden and gains from subsidies for the different population groups. We then characterize taxes and subsidies in terms of their progressiveness and regressiveness. Finally, using a Shapley decomposition, we determine the contribution of each tax and subsidy to poverty and inequality measures. This analysis is done separately for rural and urban areas, useful to formulate recommendations on this basis. Our results show that the tax and subsidy system, taken all together, is redistributive. We can also conclude unambiguously that this system reduces poverty and inequality. However, the value-added tax is regressive in its current form, unlike income tax, which is progressive. Subsidies for primary and secondary education are highly progressive, while those for higher education are regressive, benefiting the wealthiest quintiles. Finally, explicit subsidies on flour, butane gas, and sugar reduce poverty, although they are not pro-poor.1 |
| Date: | 2023–11 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pb_42-23 |
| By: | Eduardo A. Haddad; João Gabriel Sacco |
| Abstract: | - Brazil’s latest tax reform will replace five taxes on consumption with one single VAT to promote greater efficiency and sectoral isonomy. - Forecasts produced by a detailed ICGE model point to sizeable gains in GDP exceeding 4% in the long run, even if spatially unequal. - Exceptions to the rules reduce potential benefits in efficiency terms. - Policies meant to promote regional development and close the gap deepened by the reform partially achieve their goal at the expense of efficiency gains. - Lessons for the current tax reform in Morocco are drawn. |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pb_02_24 |
| By: | Mukesh Khanal; Jack Mintz; Janice MacKinnon |
| Abstract: | The World Health Organization has advocated the earmarking of health-related taxes to mobilize revenues to be spent on public health spending. While there are certain advantages and disadvantages in the use of earmarked taxes to fund healthcare, its ability to mobilize revenues will depend on whether earmarked taxes are acceptable to voters or not. Earmarking might generate more funding for health care if voters know their tax payments are to be spent on program important to them. However, earmarking might discourage funding if voters are not willing to pay more taxes for health care. Regardless, earmarking will not succeed if government simply replace earmarked taxes for general revenues, leaving public health expenditure untouched. We find that earmarked taxes do not lead to more per capita public health spending in the OECD. If a country has earmarked taxes to support public healthcare, per capita public health spending may decline by over $800, compared to a country with no earmarked taxes supporting public healthcare. The case for earmarking has to be based on other arguments instead. |
| Keywords: | taxation, earmarking, health financing |
| JEL: | H20 I18 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11306 |
| By: | Fahd Azaroual; Otaviano Canuto |
| Abstract: | Base erosion and profit shifting (BEPS) involving multinational companies is a complex, multi-dimensional problem resulting from loopholes and inconsistencies between countries’ tax systems. Addressing it requires coordinated action at the international level. Several organizations have taken initiatives in this direction, including the Organization for Economic Co-operation and Development (OECD), which, with the support of the G20, launched an ambitious project to combat BEPS in 2013. The OECD has proposed 15 measures to strengthen international tax rules in various areas, including transfer pricing, combating harmful tax practices, preventing treaty abuse, and promoting transparency and tax information exchange. This study analyzes the challenges related to the fiscal space in Africa and examines the impact of BEPS on African economies. We examine the factors that exacerbate BEPS in the region, including the absence of relevant international tax laws, the dynamics of tax treaty negotiations, and limited tax administration capacity. We will also assess the negative impact of BEPS in Africa and discuss current initiatives to address BEPS in Africa, such as those proposed by the OECD. Finally, we discuss the challenges and offer policy recommendations for increasing fiscal space and reducing BEPS in Africa. |
| Date: | 2023–08 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pb_32-23 |
| By: | Philipp Heimberger |
| Abstract: | This paper is about fiscal consolidation measures (i.e. tax hikes and government spending cuts motivated by a desire to reduce the fiscal deficit and public debt) in euro area (EA) countries. The focus is on analysing the growth effects of fiscal adjustments as well as their implications for debt sustainability assessments. I discuss the size and composition of fiscal consolidation by distinguishing three periods: the run-up to the EA, when governments faced the Maastricht criteria for joining the monetary union (1992-1998); before and during the recession triggered by the global financial crisis (1999-2009); and the euro crisis (with a specific focus on the 2011-2013 period). The empirical evidence on the growth effects of fiscal consolidation shows that while fiscal adjustments are contractionary, the negative growth effects were particularly strong and persistent during the euro crisis. With regard to the austerity outlook, I show that, beginning in 2025, EA countries are set to implement fiscal consolidations over multiple years so as to meet reformed EU fiscal rules. The adjustment requirements for some member countries are large in historical comparison. The paper argues that the framework for debt sustainability analysis at the heart of the reformed EU fiscal rules downplays the domestic growth impacts of fiscal adjustments and ignores cross-country spill-overs that magnify domestic growth effects. In all likelihood, the reformed framework underestimates the negative growth effects of fiscal consolidation. I conclude that implementing the multi-year fiscal adjustments required to meet EU fiscal rules may not reduce public debt ratios across the EA's member countries, as the European Commission expects, and that the economic and political implications of austerity may complicate the governance of a fragile EA. |
| Keywords: | Fiscal policy, fiscal consolidation, fiscal multiplier, growth, public debt, euro area |
| JEL: | H30 H63 O47 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:imk:fmmpap:109-2024 |
| By: | Winfried Koeniger (University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics; Swiss Finance Institute); Peter Kress (University of St. Gallen) |
| Abstract: | We use novel transaction-level card expenditure data to estimate the effect of the temporary value-added tax (VAT) cut in Germany 2020. We find that the annualized growth rate of expenditures for durables increased by 6 percentage points (pp) during the tax cut, with a particularly strong increase of up to 11 pp for consumer electronics. The expenditure growth rate for semidurables and non-durables did not change by and large. The estimates imply a consumption multiplier of 0.2 and an elasticity of fiscal revenues to a VAT rate reduction of two thirds. |
| Keywords: | Consumption expenditure, Transactional data, Temporary VAT cut, Unconventional fiscal policy |
| JEL: | D12 E21 E62 E65 H31 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2458 |
| By: | Yannick Bury; Lars P. Feld; Heiko T. Burret |
| Abstract: | Marginal rates of contribution (MRC), i.e., the rates at which additional revenues are skimmed via larger contributions or lower transfer receipts, quantify the incentives of a fiscal equalization scheme. The present paper is the first to calculate marginal rates of contribution for the Laender (states) in the German fiscal equalization scheme for each of the 51 years since its establishment in 1970 and over five major reforms, taking into account all relevant revenues. Our results show that MRC have been at a consistently high level. Until 2019 the scheme induced an almost full skimming of additional tax revenues of recipient states. With the system’s latest reform in 2020, MRC increased further. Recipient states now face an over-skimming of additional tax revenues and thus, massive fiscal disincentives to maintain their own tax base. While these findings have been widely expected, comprehensive evidence has been missing so far. |
| Keywords: | fiscal equalization, marginal contribution rates, constitutional reform |
| JEL: | H71 H73 H77 H11 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11293 |