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on Public Economics |
| By: | Felix Bierbrauer (University of Cologne); Pierre Boyer (Ecole Polytechnique); Andreas Peichl (LMU Munich); Daniel Weishaar (LMU Munich) |
| Abstract: | We develop a theory of tax reforms for a setting with multi-dimensional heterogeneity amongst taxpayers and multiple economic decisions that are all subject to fixed and variable costs. The theorems in this paper provide a complete characterization of the conditions under which Pareto- or welfare-improving tax reforms exist. We focus on one application, the taxation of couples, and present a detailed analysis of the behavioral responses to taxation in this setting. Squaring the theorems with this analysis yields sufficient statistics for the existence of Pareto- or welfare-improving tax reforms. In the empirical part, we apply them to US data. Our findings include the following: Tax rates on secondary earnings are inefficiently high when secondary earnings are close to primary earnings. Also, reducing the tax system’s degree of jointness is not Pareto-improving. Whether it raises welfare depends on a trade-off between poverty alleviation and gender balance. |
| Keywords: | taxation of couples; pareto efficiency; tax reforms; optimal taxation; non-linear income taxation; |
| JEL: | C72 D72 D82 H21 |
| Date: | 2024–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:518 |
| By: | Ana Maria Santacreu; Ashley Stewart |
| Abstract: | An analysis examines how U.S. multinationals’ tax and profit-shifting strategies might affect yields on direct investment in tax havens versus G7 economies. |
| Keywords: | multinational corporations; taxes; profits; tax havens; investment |
| Date: | 2024–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:99189 |
| By: | Manthos D. Delis (Audencia Business School); Emilios C. Galariotis (School of Production Engineering and Management); Maria Iosifidi (Montpellier Business School); Steven Ongena (University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. We use a unique sample of small majority- owned firms that apply for credit, where only some firms (treated) experience a corporate tax cut. We show that after the decrease in corporate tax rates, the treated poorer business owners get easier access to credit. However, this policy also considerably increases loan amounts and decreases loan spreads for the treated richer. Ultimately, reducing the corporate tax rate predominantly increases the future income and wealth of richer business owners. |
| Keywords: | Corporate taxes, Economic inequality, Bank credit, Credit score |
| JEL: | G20 G21 H25 D63 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2481 |
| By: | Kangasharju, Aki |
| Abstract: | Abstract The way economistis usually calculate the effects of corporation tax on the economy is flawed. The reduction in corporation tax is likely to pay itself back to the public sector, when the full effects of the change are taken into account. However, the effect is not immediate. |
| Keywords: | Corporate tax, Dynamic effects |
| JEL: | H2 H3 H6 E2 E6 |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:151 |
| By: | Hayato Kato (Osaka University); Andreas Haufler (LMU Munich) |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyze tax competition among multiple tax havens and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. Upon the introduction of a moderately low GMT rate, the havens commit to the single uniform GMT rate for all multinationals. However, gradual increases in the GMT rate induce the havens, and subsequently the non-haven, to adopt discriminatory, lower tax rates for small multinationals. Our calibration exercise shows that the implementation of a 15% GMT rate results in a regime where only the havens adopt split tax rates. Upon GMT introduction, welfare and tax revenues fall in the tax havens but rise in the non-haven, yielding a positive net gain worldwide. |
| Keywords: | global minimum tax; profit shifting; multinational firms; |
| JEL: | F23 H25 H87 |
| Date: | 2024–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:516 |
| By: | Bruehne, Alissa; Jacob, Martin; Schütt, Harm (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:748e1c3d-7b53-447d-9637-56ce5b3e5f03 |
| By: | Brunetti, Roberto; Gaigné, Carl; Moizeau, Fabien |
| Abstract: | We examine the role of land in wealth dynamics, and its consequences on efficiency and inequality by focusing on the interplay among agents’ bidding for location, mortgage market imperfections, and inheritance. We develop a model in which altruistic agents leave to their heirs a financial bequest and their housing wealth. The borrowing constraint generates a housing return premium and spatial wealth sorting, which translate into persistent inequality. Since altruism and the borrowing constraint distort land price formation, we discuss different corrective tax schedules. Land taxation cannot be disconnected from inheritance taxation, and must be levied on the inheriting generation. |
| Keywords: | Community/Rural/Urban Development, Consumer/Household Economics, Land Economics/Use, Public Economics |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:ags:inrasl:348477 |
| By: | Samuel Kapon (UC Berkeley); Lucia Del Carpio (INSEAD); Sylvain Chassang (Princeton University) |
| Abstract: | Tax collection with limited enforcement capacity may be consistent with both high and low delinquency regimes: high delinquency reduces the effectiveness of threats, thereby reinforcing high delinquency. We explore the practical challenges of unraveling the high delinquency equilibrium using a mechanism design insight known as “divide-and-conquer." Our preferred mechanism takes the form of Prioritized Iterative Enforcement (PIE). Taxpayers are ranked using the ratio of expected collection to capacity use. Collection threats are issued in small batches to ensure high credibility and induce high compliance. Following repayments, liberated capacity is used to issue the next round of threats. In collaboration with a district of Lima, we experimentally assess PIE in a sample of 13, 432 property taxpayers. The data both validate and refine our theoretical framework. A semi-structural model suggests that keeping collection actions fixed, PIE would increase tax revenue by roughly 10%. |
| Keywords: | Lima, Peru; prioritized iterative enforcement, divide-and-conquer, tax collection, limited government capacity |
| JEL: | H20 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:pri:cepsud:335 |
| By: | Alicia H. Munnell |
| Abstract: | The 2024 Trustees Report showed a slight drop in the 75-year deficit, but the depletion date for the retirement trust fund remains at 2033. The prospect of a 21-percent benefit cut only 9 years away should focus our attention on restoring balance to the program. Further delay has real costs: options like investing part of the trust fund in equities are disappearing as the trust fund slides towards zero; the burden of tax increases or benefit cuts fully shifts to Millennials and subsequent generations; and waiting creates a crisis, so any fix should include automatic adjustments to restore balance so we never get in this mess again. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:crr:issbrf:ib2024-11 |
| By: | Oscar Claveria (AQR-IREA, University of Barcelona); Petar Soric (University of Zagreb) |
| Abstract: | This study examines the relationship between economic uncertainty and the redistributive effect of taxes and government transfers in the UK and the US over the period 1980-2021. We find that the sign of the relationship between uncertainty and redistribution goes from being negative at the beginning of the 1980s to taking a positive and significant sign in recent years. In the US, economic uncertainty Granger-causes the redistributive effect of taxes and transfers in the short run, but the same does not hold for the UK. |
| Keywords: | economic uncertainty; redistributive policy; income inequality; taxes; government transfers. JEL classification: C50; D30; E62; H50 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aqr:wpaper:202405 |
| By: | Alessandro Belmonte (Department of Economics and Social Sciences - Marche Polytechnic University, Italy; CAGE - University of Warwick, United Kingdom); Desiree Teobaldelli (Department of Law - University of Urbino Carlo Bo, Italy); Davide Ticchi (Department of Economics and Social Sciences - Marche Polytechnic University, Italy) |
| Abstract: | We study the informational effects of foreign military intervention on citizens' motivations to participate in state-building processes. We analyze the 2012 United Nations Security Council resolution that authorized intervention in Mali to reunify the country and restore democracy during a profound institutional crisis. By exploiting the randomness of the foreign intervention announcement, relative to the timeline of the Afrobarometer interviews, we document that individuals interviewed the days after the announcement have a higher intrinsic motivation to comply with taxes, are less inclined to refuse to filing taxes, and are more reluctant to evade even if had chances, relative to individuals, interviewed immediately before, with the same characteristics, region, and ethnic group. We demonstrate that these effects are specific to regions characterized by low state capacity and limited ethnic diversity, as well as to individuals who perceive that their ethnic group has not been systematically discriminated against by the state. Consistently with our story, we document that motivations to comply only increase in respondents with access to the news at home (who own either a TV or a radio). Our results survive a wide range of falsification tests and indicate that foreign military interventions signal state-building, raising the expected benefits to participate. |
| Keywords: | Foreign Military Intervention, State Capacity, Tax Morale, Weak States, Mali. |
| JEL: | H11 H26 H56 D74 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wpaper:493 |
| By: | Alistair Cameron (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Lata Gangadharan (Monash University [Clayton]); Pushkar Maitra (Monash University [Clayton]); Paulo Santos (Monash University [Clayton]); Joseph Vecci (GU - Göteborgs Universitet = University of Gothenburg) |
| Abstract: | Together with private transfers, centralized redistribution policies form the backbone of social welfare systems worldwide. Examining their interplay is therefore crucial for understanding and addressing inequality. We investigate the relationship between private transfers and public redistribution policies using an experiment with nearly 4000 participants from Germany, India, Indonesia and the USA. The experiment creates large inequalities, then introduces one of four centralized redistribution regimes to address the inequality. Our findings reveal that no redistribution policy changes private pro-social or anti-social transfers, compared to an environment without centralized redistribution. Structural estimates show that egotistic, rather than social motives drive private transfers, and that inequality aversion is unaffected by redistribution policies, thus explaining the lack of a private response. This suggests that governments possess an additional degree of freedom in pursuing social safety nets. |
| Keywords: | Redistribution, Inequality Aversion, Experiments |
| Date: | 2024–11–29 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cdiwps:hal-04811881 |