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on Public Economics |
| By: | David Gstrein; Florian Neumeier; Andreas Peichl; Pascal Zamorski |
| Abstract: | Key MessagesThe corporate tax burden falls mainly on firms and property owners, while workers are less affected than earlier studies suggestCommercial property owners bear a substantial share of the burden as higher taxes reduce property valuesThe lower tax burden on workers suggests that corporate taxation is likely more progressive than often assumedBecause land is immobile, corporate tax distorts economic decisions less than expectedCorporate tax debates should go beyond firms and workers to include property markets, with implications for fairness, efficiency, and local tax policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_77 |
| By: | Sugata Marjit; Koushik Hati; Lei Yang |
| Abstract: | This paper explores whether tax compliance would be affected if the tax payers are “status” seekers. If relative income is a symbol of relative status in a society, status concerned individuals would evade paying taxes more relative to the case where status is not a concern. However, such an outcome would not hold if the symbol of relative status is relative consumption of the “status” good and not relative income. We generalize the scenario by introducing a measure of relative status which depends on both relative income and consumption of the status good. |
| Keywords: | status-seeking behavior, tax evasion, relative income, conspicuous consumption, Inequality |
| JEL: | H26 D31 D91 O15 H21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12193 |
| By: | Ed Cornforth |
| Abstract: | With tax rises likely in the upcoming Autumn Budget, this policy brief argues that the most realistic option is to look at one of the four main taxes: corporation tax, income tax, employee National Insurance Contributions (NICs) or Value Added Tax (VAT). This being the case, the rest of the brief explores the effects on the economy of raising these taxes. Using our Global Macroeconometric Model (NiGEM) this scenario compares different tax options available to the Chancellor at the forthcoming Autumn Budget. We assume that the government aims to raise total net annual revenue by £30 billion by 2029–30, in line with external forecasts of how much the Chancellor needs to raise to meet her current budget fiscal rule (the "stability rule"). The analysis suggests that a rise in the rate of income tax would appear to be the least economically damaging option available to the Chancellor at this time. Although there are risks around raising income tax rates such as a negative effect on labour supply or a larger than expected reduction in aggregate consumption, it is unlikely that, even if these risks came to pass, any other option would be better. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nsr:niesrp:47 |
| By: | Nóra Kungl (The Vienna Institute for International Economic Studies, wiiw); Hana Ross (The Vienna Institute for International Economic Studies, wiiw); George Stefan |
| Abstract: | In August 2025, as part of a large fiscal package, Romania announced an increase in tobacco and alcohol excise taxes, news welcomed by proponents of public health. However, the announcement turned into a disappointment for the tobacco control community when the final increase in cigarette excise tax amounted to only 2.25%. This policy note outlines the reform and uses a simulation model to demonstrate the missed opportunity to adopt pro-health tobacco tax policy. By not implementing a 10% increase, as for other excises, the newly adopted schedule not only fails to reduce smoking prevalence but also deprives Romania of an opportunity to collect RON 1.657bn (EUR 326.6m) in additional tax revenues in 2025-2027. Moreover, an accelerated tax roadmap aligning Romania with the proposed EU Tobacco Taxation Directive by 2027 would raise an additional RON 4.73bn (EUR 932m), reduce smoking prevalence by 4%, and avert nearly 50, 000 smoking-related premature deaths. |
| Keywords: | Excise, Taxation, Tobacco, Smoking |
| JEL: | H24 I18 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:wii:pnotes:pn:100 |
| By: | Esteban García-Miralles; Maximilian Freier; Sara Riscado; Chrysa Leventi; Alberto Mazzoni; Glenn Abela; Laura Boyd; Baiba Brusbārde; Marion Cochard; David Cornille; Emanuele Dicarlo; Ian Debattista; Mar Delgado-Téllez; Mathias Dolls; Ludmila Fadejeva; Maria Flevotomou; Florian Henne; Alena Harrer-Bachleitner; Viktor Jaszberenyi-Kiraly; Max Lay; Laura Lehtonen; Mauro Mastrogiacomo; Tara McIndoe Calder; Mathias Moeser; Martin Nevický; Andreas Peichl; Myroslav Pidkuyko; Mojca Roter; Frederique Savignac; Andreja Strojan Kastelec; Vaidotas Tuzikas; Nikos Ventouris; Lara Wemans |
| Abstract: | This paper presents a comprehensive characterization of “fiscal drag”—the increase in tax revenue that occurs when nominal tax bases grow but nominal parameters of progressive tax legislation are not updated accordingly—across 21 European countries using a microsimulation approach. First, we estimate tax-to-base elasticities, showing that the progressivity built in each country’s personal income tax system induces elasticities around 1.7–2 for many countries, indicating a potential for large fiscal drag effects. We unpack these elasticities to show stark heterogeneity in their underlying mechanisms (tax brackets or tax deductions and credits), across income sources (labor, capital, self-employment, public benefits), and across the individual income distribution. Second, we extend the analysis beyond these elasticities to study fiscal drag in practice between 2019 and 2023, incorporating observed income growth and legislative changes. We quantify the actual impact of fiscal drag and the extent to which government policies have offset it, either through indexation or other reforms. Our results provide new insights into the fiscal and distributional effects of fiscal drag in Europe, as well as useful statistics for modeling public finances. |
| Keywords: | personal income tax, inflation, indexation, bracket creep |
| JEL: | D31 H24 E62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12192 |
| By: | Anna D’Annunzio (Tor Vergata University of Rome, CSEF and Toulouse School of Economics.); Antonio Russo (Institut Mines-Telecom Business School.) |
| Abstract: | We study the effects of taxes and fees in markets where sellers practice second-degree price discrimination, offering multiple versions of their product. Sellers distort the quantity (or quality) intended for all types of consumers, except for those with the highest marginal willingness to pay. We show that ad valorem taxes/fees can alleviate this distortion, thereby generating revenue while increasing consumer surplus and welfare, provided the tax rate increases with the size or quality of the version it applies to. We explore the implications of this result for important issues in fiscal policy (taxation of sin goods and of goods affecting labor supply). We also consider applications to the analysis of vertical relations between firms, as well as the strategy of platforms when setting prices for access and when competing with sellers. |
| Keywords: | Commodity taxation, tax incidence, price discrimination, sin goods. |
| JEL: | D4 H21 H22 L1 |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:761 |
| By: | Mr. Matthieu Bellon; Ross Warwick |
| Abstract: | Can simply exceeding a critical tax-to-GDP threshold bring about an accelerated trajectory of economic growth and development in a country? We conduct new event studies and exploit a richer dataset to revisit Gaspar, Jaramillo and Wingender’s 2016 “tax tipping point” result. Both with their regression discontinuity approach and a dynamic difference-in-differences estimation, we find that cumulative growth over 10 years increases by 10 percentage points when a country’s tax-to-GDP ratio increases above a 10 percent threshold. Further, we show that crossing the threshold coincides with the beginning of significant improvements in measures of a country’s financial development, government effectiveness, legal framework, and governance. Event studies additionally reveal that only transformational episodes of tax increases above the threshold deliver these gains: episodic crossings that fail to bring tax revenues durably above the threshold and that don't coincide with improvements in financial development and government effectiveness yield fleeting gains. Our results suggest that a minimal tax capacity is necessary for growth but emphasize that only a sustained tax increase associated with other developmental progress is sufficient. |
| Keywords: | Income per Capita; Taxation; Development; Multiple Equilibria; Event Study |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/203 |
| By: | Emanuele Dicarlo; Laurence J. Kotlikoff; Mauro Marè; Marco Olivari |
| Abstract: | This study uses fiscal gap accounting (FGA) and generational accounting (GA) to compare US and Italian fiscal solvency. FGA and GA incorporate all government outlays and receipts, whether put on or kept off the books. FGA measures, in the form of reduced net outlays, the constant share of each future year’s GDP needed to balance the government’s intertemporal budget. GA calculates the lifetime net tax rate – lifetime taxes divided by lifetime labor earnings -- facing future generations if current generations pay nothing more, on net, than current policy mandates. Deficit accounting suggests that Italy’s 135 percent debt-to-GDP ratio places it in worse fiscal shape than the US with its 123 percent ratio. But on a fiscal-gap basis, Italy appears in far better shape regardless of the discount rate used. Based on the theoretically appropriate rate – the average real return to national wealth, the U.S. fiscal gap is 7.4%. Italy’s is 4.0%. These requisite solvency adjustments are far larger if delayed or if the UN’s more pessimistic demographic projections prevail. Neither country can expect future generations, on their own, to cover their government’s red ink. Doing so requires levying lifetime net tax rates, in each country, that exceed 100%. |
| JEL: | H20 H50 H6 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34340 |
| By: | António Afonso; M. Carmen Blanco-Arana; Ana J. Cisneros-Ruiz |
| Abstract: | The main aim of this paper is to empirically assess the impact of education and tax revenue on fostering new business creation in the OECD countries. To this end, we employ fixed effects and random effects models using panel data from 2006 to 2022, incorporating alternative conditions. Results confirm that while education and the economic situation are key pillars in fostering new business creation, the role of tax revenue in supporting economic development – and, by extension, new business formation – is fundamental, even if non-linear, with a threshold of 30% of GDP. Tax revenue collected by governments provides essential funding for public goods and services such as infrastructure, education, and innovation support programs, all of which contribute to creating an environment where new businesses can emerge and thrive. Our findings remain robust under the GMM estimation. |
| Keywords: | New Business; Tax Revenue; Education; Economic Growth; Panel Data. |
| JEL: | C23 H2 I2 M20 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03952025 |
| By: | Alvaro Forteza; Diego Tuzman |
| Abstract: | In this paper, we present estimations of the distribution and redistribution of per-period income that can be associated to social security using two approaches, one that follows the conventional practice of treating pensions as government transfers and an- other one that proposes to measure pension income as the return of pension wealth. Using data for Uruguay, we find that the former approach estimates less inequality in the presence of pensions and much larger decrease in inequality due to pensions than the latter. We show that the implicit assumption that individuals would not increase voluntary savings in the absence of pensions contributes to a strong apparent equalizing effect of pensions. As several scholars have warned, this assumption is not warranted. |
| Keywords: | Pensions, Distribution, Redistribution, Fiscal incidence, Fiscal policy |
| JEL: | D31 H55 I38 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ude:wpaper:0924 |
| By: | Roth, Jakob; Schwab, Laura; Hintermann, Beat; Götschi, Thomas; Meister, Adrian; Meyer de Freitas, Lucas; Axhausen, Kay W. |
| Abstract: | This study presents results from a randomized controlled trial involving 1, 085 participants in Switzerland that have access to an E-bike, a car, and public transport. The participants’ transport choices are monitored by means of a GPS-based tracking app. The treatment consists in a monetary incentive that approximates the main external costs and benefits associated with transport in the spirit of a Pigovian tax. This tax reduces transport-related external costs by 6.9 %, which corresponds to 78 Swiss francs per person and year (currently equivalent to 94 US dollars). The main underlying mechanism is a mode shift away from driving towards E-biking, public transport and walking. The results are primarily driven by individuals who own an S-pedelec with support up to 45 km/h, rather than users of the more common E-bikes that provide support up to 25 km/h. The pricing also induces a travel shift towards less congested time windows |
| Keywords: | Transport, Field experiment, GPS tracking, bicycle, E-bike, external costs, Pigovian taxation, transport pricing |
| JEL: | H23 H31 I18 Q54 Q58 R41 R48 |
| Date: | 2025–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2025/05 |
| By: | Bachmann, Ruediger; Born, Benjamin; Goldfayn-Frank, Olga; Kocharkov, Georgi; Luetticke, Ralph; Weber, Michael |
| Abstract: | We exploit Germany's temporary three-percentage-point VAT cut in the second half of 2020 to study the spending response to unconventional fiscal policy. We use survey and scanner data on household consumption expenditures and their perceived pass-through of the tax change into prices, and a RANK model to quantify the effects of this VAT policy. The survey and scanner data show that the temporary VAT reduction led to a relative increase in durable and, to a lesser extent, semidurable spending for individuals with high perceived pass-through. According to the RANK model, the VAT policy increased total aggregate consumption spending by 4.4 percent on impact. |
| Keywords: | unconventional fiscal policy, value added tax, survey data, expectations, consumption, durables, RANK model |
| JEL: | D12 E20 E21 E62 E65 R31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:328247 |
| By: | Riddell, Chris (University of Waterloo); Riddell, W. Craig (University of British Columbia, Vancouver) |
| Abstract: | We re-assess the consequences of a NIT for two-parent families, utilizing hitherto untapped data. The Gary and Seattle experiments fail balancing tests. In New Jersey, Denver and Manitoba we estimate far greater labor supply responses than the current consensus, with remarkable consistency in point estimates and statistical significance across experiments, genders and countries. On the other hand, using newly collected data from archival records, we estimate substantial increases in happiness, marital satisfaction, household production, and social activities in Manitoba. We also reject the contentious finding that the NIT increased marital separations in Seattle-Denver, which is driven solely by Seattle. |
| Keywords: | household well-being, marital satisfaction, labour supply, income support, Negative Income Tax, basic income |
| JEL: | C93 I38 J12 J22 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18174 |
| By: | Montpetit, Sebastien (Department of Economics, University of Warwick); Carrer, Luisa (Department of Economics, ESCP Business School); Beauregard, Pierre-Loup (Department of Economics, University of British Columbia) |
| Abstract: | We assess the welfare impact of the introduction of universal daycare services in Quebec in 1997. Unlike the standard suffcient-statistic metric, which assumes marginal changes in fiscal policy, our approach accounts for the non-marginal nature of the program and quantifies nonpecuniary benefits. Through a structural model of childcare demand, we estimate substantial welfare gains from the policy, yielding a Marginal Value of Public Funds (MVPF) above 3.5. Using the suffcient-statistic approach underestimates welfare gains by half. Counterfactual simulations and a difference-in-differences analysis suggest that increasing availability, rather than solely improving affordability, is crucial for the effective design of universal programs. |
| Keywords: | universal childcare ; daycare coverage ; social welfare ; suffcient statistics ; non-marginal policy JEL Codes: D61 ; H43 ; J13 ; J22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1584 |