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on Public Economics |
| By: | Yukihiro Nishimura (Osaka University and CESifo) |
| Abstract: | Given that the incentive consideration reduces the scope for redistribution, Mirrlees (1976, Optimal tax theory: a synthesis. Journal of Public Economics 6, 327‒358) emphasized the redistributive effects of commodity taxes (which include capital income tax), which reduces the effective tax wedge on labor income. We revert to the unidimensional case to show that the optimal labor wedge can become higher after the introduction of the optimal commodity taxes/subsidies when labor complements are subsidized. This is partly because supplementary commodity taxes are not increasing in ability as Mirrlees (1976) thought. Among the classic results, decreasing marginal taxes on the middle class, including the mode of the income distribution, remains valid with commodity taxes and without separability in the utility function. |
| Keywords: | Commodity tax, Income tax, Marginal income tax rates |
| JEL: | H21 H24 D63 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2508 |
| By: | Yukihiro Nishimura (Osaka University and CESifo) |
| Abstract: | The nature of optimal commodity taxes and tax reform are not well understood in the literature under the separability of subset of consumption goods. We show in this paper that, contrary to the claims of previous researches, under the combination of non-linear income tax and linear commodity taxes, a tax reform towards uniform taxes of the subset of commodities may not be welfare-improving. Furthermore, a distortion of production that alters the relative wages has additional benefit through mimickers’ consumption choices. We also newly characterize the optimal commodity taxes in this setting to show that, to quench possible heterogeneous impacts to the cross-substitution effects on the other commodities, optimally uniform tax towards the separated goods requires uniform income effects across income classes, so that the constraint on the Engel curves in the corresponding optimally linear income and commodity taxes cannot be fully omitted. |
| Keywords: | Uniform commodity taxes, Tax reform, Income tax |
| JEL: | H21 H24 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2509 |
| By: | Georgy Lukyanov; Emin Ablyatifov |
| Abstract: | This short note studies optimal taxation when the use of tax revenue for public consumption is uncertain. We consider a one-period general-equilibrium economy with a representative household and a competitive firm. The government may be honest, in which case revenue is converted one-for-one into public consumption, or opportunistic, in which case nothing is delivered. We treat trust as the prior probability that the government is honest and ask how it shapes both the overall scale of taxation and the choice between a labor tax and a broad commodity (output) tax. Three results emerge. First, there is a trust threshold below which any positive tax lowers welfare. Second, above that threshold there is an equivalence frontier: a continuum of tax mixes that implement the same allocation and welfare. Third, small instrument-specific administrative or salience costs uniquely select the revenue instrument, typically favoring the cheaper broad base. An isoelastic specialization yields closed-form expressions that make the threshold, optimal rates, delivered public consumption, and welfare transparent. The framework offers a compact policy map: build credibility before raising rates, keep the base broad, and let measured trust determine the scale. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.03085 |
| By: | Lea Fricke; Clemens Fuest; Dominik Sachs |
| Abstract: | We study optimal redistribution and carbon taxation in a Mirrlees framework. Households differ in their carbon footprint due to both (i) the overall level of spending and (ii) the composition of spending. Introducing a cap on carbon emissions reduces the social value of output, which lowers the efficiency costs of taxation and thereby strengthens the scope for redistribution. However, the optimal increase in redistribution is weaker than suggested by popular proposals for a carbon dividend. While the optimal rebate schedule overcompensates low-income households and undercompensates high-income households for their carbon tax burden, the rebate nevertheless rises with income. Quantifying the model for Germany, we find that the optimal rebate for the 90th income percentile is nearly three times that for the 10th percentile, whereas carbon tax payments are about seven times higher. This results in higher effective average tax rates at the top and lower ones at the bottom of the income distribution. |
| Keywords: | carbon tax, optimal taxation, carbon dividend |
| JEL: | H21 H23 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12085 |
| By: | Akcan S. Balkir; Emmanuel Saez; Danny Yagan; Gabriel Zucman |
| Abstract: | We estimate income and taxes for the wealthiest group of US households by matching Forbes 400 data to the individual, business, estate, and gift tax returns of the corresponding group in 2010–2020. In our benchmark estimate, the total effective tax rate—all taxes paid relative to economic income—of the top 0.0002% (approximately the “top 400”) averaged 24% in 2018–2020 compared with 30% for the full population and 45% for top labor income earners. This lower total effective tax rate on the wealthiest is substantially driven by low taxable individual income relative to economic income. First, the C-corporations owned by the wealthiest distributed relatively little in dividends, limiting their individual income tax unless they sell their stocks. Second, top-owned passthrough businesses reported negative taxable income on average in spite of positive book income, further limiting their individual income tax. The top-400 effective tax rate fell from 30% in 2010–2017 to 24% in 2018–2020, explained both by a smaller share of business income being taxed and by that income being subject to lower tax rates. Estate and gift taxes contributed relatively little to their effective tax rate. Top-400 decedents paid 0.8% of their wealth in estate tax when married and 7% when single. Annual charitable contributions equalled 0.6% of wealth and 11% of economic income in 2018–20. |
| JEL: | H2 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34170 |
| By: | Mr. Ruud de Mooij; Mr. Shafik Hebous; Mr. Michael Keen |
| Abstract: | This paper examines the efficiency of the Value Added Tax (VAT), focusing on its role as a revenue-raising tool and its use to achieve non-revenue objectives. The analysis highlights the VAT's potential ability to generate revenue with minimal distortions, emphasizing its advantages over alternative taxes, such as turnover taxes and tariffs, particularly in minimizing the cascading effects of input taxation. The paper also explores the VAT as a macroeconomic policy tool, especially in counter-cyclical fiscal policy, and its potential to address environmental and health objectives. It concludes that a well-designed and implemented VAT is a highly efficient revenue-raising tool, surpassing other forms of consumption taxation, but cautions against its misuse in industrial policy and other contexts for which it is ill-suited. |
| Keywords: | Value Added Tax; Efficiency; Welfare |
| Date: | 2025–08–22 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/165 |
| By: | David Gstrein; Florian Neumeier; Andreas Peichl; Pascal Zamorski |
| Abstract: | This paper presents novel estimates of the incidence of corporate taxes by measuring the effect of local business taxes on the welfare of commercial landowners, residential landowners, firm owners, and workers. We use unique data on real estate prices in Germany covering over 32 million properties offered for sale or rent between 2008 and 2019 in combination with administrative data on wages and firm profits. Empirically, we exploit the German institutional setting with over 17, 000 municipal tax changes using an event study design. The estimates suggest that a one percentage point business tax increase reduces commercial real estate prices by three percent after four years on average, while commercial rents decline by one percent. Wages decline by about one percent, profits by two percent. These results are robust to the inclusion of a large set of controls and to estimators that account for heterogeneous treatment effects. We use the reduced-form estimates to update current incidence measures and find that commercial landowners bear a significant share of the tax burden (≈ 16%) in the medium-run, while workers (≈ 10%) and residential landowners (≈ 10%) are likely to bear a smaller burden. Firm owners bear the largest share of the burden (≈ 64%). |
| Keywords: | corporate taxation, tax incidence, real estate markets |
| JEL: | H22 H25 H71 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12062 |
| By: | Michele Bernasconi (Ca’ Foscari University of Venice); Irene Maria Buso (University of Bologna); Anna Marenzi (Ca’ Foscari University of Venice); Dino Rizzi (Ca’ Foscari University of Venice) |
| Abstract: | Several empirical studies find large behavioural responses to the incentives created by tax notches, highlighting the challenge of distinguishing between responses driven by real effects and by tax reporting. In a lab experiment, we find strong evidence of excessive bunching in a tax notch system, both with and without evasion possibilities. The effort adjustments are mainly from above the threshold, while the evasion adjustments are mainly from below the threshold. Both adjustments contribute to a reduction in the underreporting rate. We also confirm evidence of optimisation frictions. They are stronger when evasion is possible than when it is not. A gender breakdown highlights both the robustness of the effects found and the impact that heterogeneous preferences can have on the overall responses to tax notches. |
| Keywords: | Tax Evasion, Effort, Bunching, Lab Experiment |
| JEL: | H24 H26 C91 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2025:15 |
| By: | Kazuki Onji (The University of Osaka); Roger H. Gordon (University of California, San Diego); Tue Gørgens (Australian National University) |
| Abstract: | In assessing the influence of taxes on corporate takeovers, sorting among firms poses complications. We employ a recently developed matching model that explicitly accounts for sorting behaviors, applying it for the first time to analyze tax implications in corporate takeover markets. Examining Japanese M&A transactions (1999–2018) between publiclytraded corporations, our estimates reveal heterogeneous effects, where the role of acquirer information and control perceptibly moderates the value of loss carryforwards across different transaction types. However, the estimated value generated from loss carryforwards is modest, indicating the stringency of Japan’s anti-avoidance rules. |
| Keywords: | Corporate tax, corporate reorganization, M&As, matching estimator |
| JEL: | H25 H32 G34 L20 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2510 |
| By: | Bergman, Aaron (Resources for the Future); Rennert, Kevin (Resources for the Future) |
| Abstract: | On Wednesday, May 29, the Department of Treasury and the Internal Revenue Service released proposed guidance for the section 45Y production tax credit (PTC) and the section 48E investment tax credit (ITC). These tax credits serve as a technology-neutral replacement for the existing tax credits for clean electricity. As we detailed in our prior issue brief, these new tax credits provide a welcome consistency and certainty to the tax code but also present a few novel questions to be resolved. Treasury has given the public 60 days to comment on the proposed guidance, ending on August 2. In this issue brief, we discuss what is new in the guidance, how Treasury has resolved some of the issues we previously identified and what major questions remain to be addressed through the public comment process. |
| Date: | 2024–07–10 |
| URL: | https://d.repec.org/n?u=RePEc:rff:ibrief:ib-24-06 |
| By: | Ayoub Bourass (Faculté des sciences juridiques, économiques et sociales de Mohammedia, Université Hassan II, Casablanca, Maroc) |
| Abstract: | The purpose of this paper is to present a meta-analytic review of the literature on the key factors of tax justice and their impact on tax morale and tax compliance, highlighting the complexity of individual, institutional, and contextual factors that shape equity perceptions and taxpayer behavior. Drawing on a rigorous statistical synthesis of findings from multiple quantitative studies, this meta-analytic review identifies consistent effect patterns, assesses the relative importance of various determinants, and examines their variation across different settings. The results show that tax justice is perceived to be greater when institutions are efficient, transparent, and low in corruption, when public spending is considered fair, and when citizens participate in budgetary decision-making. Higher tax morale is associated with modernized institutions, increased trust in public authorities, and enhanced civic participation. Furthermore, sociocultural norms and values—such as culture, religion, and social norms—play a crucial role: tax moraleincreases when compliance is a socially valued norm and tax evasion is socially disapproved, while it declines in contexts marked by low social trust and high perceived levels of widespread tax evasion. This analysis underscores the importance of adoptingan integrated, evidence-based approach to strengthen tax justice and compliance across diverse institutional and cultural contexts. |
| Abstract: | L'objectif de cet article est de présenter une revue méta-analytique de la littérature portant sur les facteurs clés de la justice fiscale et leur impact sur la morale et la conformité fiscales, en mettant en lumière la complexité des facteurs individuels, institutionnels et contextuels qui influencent les perceptions d'équité et les comportements des contribuables. En s'appuyant sur une synthèse statistique rigoureuse des résultats d'études quantitatives publiées, cette revue méta-analytique permet d'identifier des effets convergents, de pondérer l'importance relative des différents déterminants et d'analyser leur variation selon les contextes. Les résultats montrent que la justice fiscale est perçue comme plus grande lorsque les institutions sont efficaces, transparentes et peu corrompues, que les dépenses publiques sont jugées équitables, et que les citoyens participent aux décisions budgétaires. Une morale fiscale plus élevée est associée à des institutions modernisées, à une confiance accrue dans les autorités publiques et à une meilleure participation citoyenne. En outre, les normes et valeurs socioculturelles —telles que la culture, la religion et les normes sociales —jouent un rôle clé : la morale fiscale s'accroît lorsque la conformité est une norme sociale valorisée et que la fraude est socialement désapprouvée, tandis qu'elle s'effrite dans les contextes marqués par une faible confiance sociale et une forte perception de l'évasion fiscale généralisée. Cette analyse souligne ainsi l'importance d'adopter une perspective intégrée et fondée sur des données probantes pour renforcer la justice et la conformité fiscales dans divers cadres institutionnels et culturels. |
| Keywords: | Impôt, Justice fiscale, morale fiscale, conformité fiscale, tax morale, tax compliance, Fraude fiscale |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05226744 |
| By: | Fernandez Sierra, Manuel (Universidad de los Andes); Gonzalez-Navarro, Marco (University of California, Berkeley); Quintana-Domeque, Climent (University of Exeter) |
| Abstract: | Developing countries often face a cycle where weak tax compliance limits public goods, cutting incentives to pay taxes. We test whether improved local infrastructure can disrupt this cycle, using a randomized street paving experiment in Acayucan, Mexico. Of 56 eligible street projects, 28 were randomly selected. A model highlights two mechanisms: belief updating about government efficiency and reciprocity from direct benefits. Three implications follow: (1) belief updating occurs through exposure to paving anywhere in the network; (2) compliance rises with broader exposure; (3) reciprocity boosts compliance among directly treated owners. Survey data supports belief updating: among initially dissatisfied residents, a one-SD increase in exposure to assigned paving lowered dissatisfaction by 7.9 pp, while exposure to actual paving lowered it by 8.8 pp, with no effect among the satisfied. Property tax records show exposure to assigned paving raised compliance by 1.5 pp, and to actual paving by 2.6 pp (3% above baseline). Reciprocity mattered too: owners whose street was assigned paving (or actually paved) increased compliance by 3.2 pp (4.8 pp, or 5.5% above baseline). Belief updating yields four times as much revenue as reciprocity. |
| Keywords: | government efficiency, reciprocity, belief updating, infrastructure, roads, taxpayer behavior, public investment, satisfaction with local government |
| JEL: | C93 H26 H41 H54 O12 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18082 |
| By: | Ayoub Bourass (Professeur de l’enseignement supérieur à l’université Hassan II, faculté des sciences juridiques, économiques et sociales de Mohammedia) |
| Abstract: | This paper examines the distribution of powers in tax decision-making in Morocco, revealing a deep-rooted inequity embedded in the country's political history. From the Makhzen state, where the Sultan held a tax monopoly used as a tool of control, to the contemporary state, taxation has remained a domain dominated by the executive and the monarchical institution, marginalizing Parliament and countervailing powers. The colonial period rationalized the system not to make it fairer, but to serve economic exploitation, thereby deepening inequalities. After independence, despite the appearance of modernization, tax decision-making remained concentrated in the hands of the monarchy and influenced by international financial institutions, while economic elites, such as the CGEM, have exerted growing pressure. This system, marked by a democratic deficit and lack of transparency, contradicts the official discourse on tax justice. To address this, it is essential to strengthen parliamentary autonomy, ensure genuine representation, and transform taxation into a lever for redistribution and democratic legitimacy. |
| Abstract: | Cet article examine la répartition des pouvoirs dans la décision fiscale au Maroc, révélant une inquiétudeprofonde ancrée dans l'histoire politique du pays. Depuis l'État du Makhzen, où le sultan détenait un monopole fiscal utilisé comme instrument de contrôle, jusqu'à l'État contemporain, la fiscalité est restée un domaine dominé par le pouvoir exécutif et l'institution monarchique, marginalisant le Parlement et les contre-pouvoirs. La période coloniale a rationalisé le système non pas pour le rendre plus juste, mais pour servir l'exploitation économique, creusant ainsi les inégalités. Après l'indépendance, malgré une apparence de modernisation, la décision fiscale est restée concentrée entre les mains de la monarchie et influencée par les institutions financières internationales, tandis que les élites économiques, comme la CGEM, exercent une pression croissante sur les réformes. Ce système, marqué par un déficit démocratique et un manque de transparence, dément le discours officiel sur la justice fiscale. Pour y remédier, il est essentiel de renforcer l'autonomie du Parlement, d'assurer une véritable représentativité et de faire de la fiscalité un levier de redistribution et de légitimité démocratique. Abstract:This paper examines the distribution of powers in tax decision-making in Morocco, revealing a deep-rooted inequity embedded in the country's political history. From the Makhzen state, where the Sultan held a tax monopoly used as a tool of control, to the contemporary state, taxation has remained a domain dominated by the executive and the monarchical institution, marginalizing Parliament and countervailing powers. The colonial period rationalized the system not to make it fairer, butto serve economic exploitation, thereby deepening inequalities. After independence, despite theappearance of modernization, tax decision-making remained concentrated in the hands of the monarchy and influenced by international financial institutions, while economic elites, such as the CGEM, have exerted growing pressure. This system, marked by a democratic deficit and lack of transparency, contradicts the official discourse on tax justice. To address this, it is essential to strengthen parliamentary autonomy, ensure genuine representation, and transform taxation into a lever for redistribution and democratic legitimacy. |
| Keywords: | tax history, taxation authority, tax state, gouvernance fiscale, histoire fiscale, État fiscal, pouvoir fiscal, Décision fiscale, démocratie fiscale |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05226752 |
| By: | Andrew Blair-Stanek; Nils Holzenberger; Benjamin Van Durme |
| Abstract: | We investigate whether large language models can discover and analyze U.S. tax-minimization strategies. This real-world domain challenges even seasoned human experts, and progress can reduce tax revenue lost from well-advised, wealthy taxpayers. We evaluate the most advanced LLMs on their ability to (1) interpret and verify tax strategies, (2) fill in gaps in partially specified strategies, and (3) generate complete, end-to-end strategies from scratch. This domain should be of particular interest to the LLM reasoning community: unlike synthetic challenge problems or scientific reasoning tasks, U.S. tax law involves navigating hundreds of thousands of pages of statutes, case law, and administrative guidance, all updated regularly. Notably, LLM-based reasoning identified an entirely novel tax strategy, highlighting these models' potential to revolutionize tax agencies' fight against tax abuse. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20097 |
| By: | Gunther Capelle-Blancard (Université Paris 1 Panthéon-Sorbonne, Centre d'Econonomie de la Sorbonne & Paris School of Business) |
| Abstract: | The aim of this note is to assess whether and how the Financial Transaction Tax (FTT) could be "greened" - that is, adapted or utilized to support environmental objectives and the financing of the transition to a more sustainable economy. While traditionally conceived as a regulatory tool, the FTT also holds unexploited potential as an instrument for climate finance and broader environmental alignement. This paper outlines five complementary arguments in favor of a green FTT: (1) its capacity to mobilize stable, international funding for global public goods; (2) its symbolic relevance in light of the financial sector's contribution to social and environmental disruption; (3) its ability to modestly lengthen investment horizons and counteract excessive short-termism; (4) its potential to enhance public trust in finance by matching rhetoric about sustainable finance with contributions; and (5) its propective use as a differentiated tool to reward environmentally responsible issuers. The paper also includes a first quantitative assessment of potential revenues from a tiered green FTT, illustrating how such a mechanism could operationalize the principle of common but differentiated responsibilities and respective capabilities in climate finance. While recognizing practical limitations (in terms of governance, data reliability, ans risk of complexity) the paper concludes that a well-calibrated green FTT could be a simple yet effective lever in aligning financial markets with the ecological transition |
| Keywords: | Financial transaction tax; Securities Transaction Tax; Tobin tax; Innovative Financing; Climate Finance |
| JEL: | G1 H2 Q5 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:mse:cesdoc:25012 |