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on Public Economics |
| By: | Michaël Sicsic |
| Abstract: | This paper analyses the impact of introducing progressivity into the Hungarian personal income tax (PIT) system on tax revenues, growth and inequality. This reform would strengthen labour market participation by reducing the labour tax wedge for low-income earners and improve the responsiveness of tax revenues to economic growth. Using a framework combining static effects and behavioural responses along both the extensive margin (employment effects) and the intensive margin (substitution and income effects), and accounting for tax buoyancy, the analysis shows that the reform becomes revenue-enhancing once these dynamic effects are considered. Aligning capital income taxation more closely with labour taxation further strengthens tax revenues. The comprehensive reform would raise the tax-to-GDP ratio by 0.4–0.8pp by 2040, depending on the specific reform scenario and assumed parameters. By stimulating employment among low- and middle-income workers and despite moderate disincentives for higher-income earners, the reform would boost potential GDP in all scenarios. The reform would also significantly reduce income inequality and strengthen redistribution. |
| Keywords: | elasticity of taxable income, Hungary, income inequality, labour supply elasticity, personal income tax, tax buoyancy, tax progressivity, tax reform |
| JEL: | H21 H24 H31 J22 D31 |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1868-en |
| By: | Jose Maria Tubio-Sanchez (International Center for Decentralization and Governance (IDEAGOV)); Santiago Lago-Peñas (International Center for Decentralization and Governance (IDEAGOV)); Xoaquin Fernandez-Leiceaga (International Center for Decentralization and Governance (IDEAGOV)); Maria Cadaval-Sampedro (International Center for Decentralization and Governance (IDEAGOV)) |
| Abstract: | Although an extensive theoretical literature debates the advantages of taxing wealth stocks versus capital income, the role of partisan effects in shaping these fiscal tools remains under-explored. This study investigates the party control effect on local property taxation in Spain, comparing a recurrent tax on property wealth with a capital gains tax on property transfers, a non-mandatory tax. Employing a regression discontinuity design on close municipal elections from 2011 to 2015, a period marked by the aftermath of the 2008 financial crisis, we isolate the impact of left-wing government control. We find that left-wing governments increase effective property tax rates roughly twice the average increase under right-wing administrations, an effect substantially amplified in multi-term governments (mayors with previous experience) and unaffected by coalition status. For the capital gains tax, ideology mainly affects the adoption decision: left-wing governments are about 5 percent more likely to implement the tax, and this effect is stronger in less wealthy municipalities. However, once the tax is in place, the partisan effect plays no systematic role in determining the tax rate. Thus, despite a political discourse that does not map neatly onto the wealth-versus-capital-income distinction, actual partisan behaviour aligns broadly with theoretical expectations. The post-crisis context amplified ideological differences in property tax responses. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2623 |
| By: | Berliant, Marcus; Gouveia, Miguel |
| Abstract: | The political economy setting of voting over general nonlinear income taxes with labor disincentives and information asymmetry in consumer/worker/voter types is considered. Agents do not communicate or coordinate with each other. The economy is the realization of a finite draw from a continuous distribution. The revenue required from a draw is determined by Pareto optimal provision of a public good for that draw. Assuming that the government must meet the revenue requirement for any possible draw, in other words the tax is robust, a majority rule equilibrium is shown to exist at the median voter's preferred tax function out of this robust set. The key restrictions on utility are additive separability, quasi-linearity, and utility from the public good is multiplicative in type. |
| Keywords: | Voting; Income taxation; Public good; Robustness |
| JEL: | D72 D82 H21 H41 |
| Date: | 2026–05–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128974 |
| By: | Ashley Craig; Itai Sher |
| Abstract: | Less-salient taxes can ease the classic equality-efficiency trade-off by making people respond less to taxation. But deliberately obscuring taxes may be viewed as dishonest. This creates a three-way trade-off between equality, efficiency, and honesty. We analyze this trade-off in a simple setting with a linear income tax. We define and characterize the morally efficient frontier, trading off utilitarian welfare against honesty or transparency. Complete honesty is Pareto inefficient but not morally inefficient. More generally, any increase in honesty reduces utilitarian welfare. When utilitarian welfare is decomposed into equality and efficiency, the cost of honesty falls most robustly on equality: higher salience always reduces equality, while the effect on efficiency is ambiguous. This asymmetry is explained by the fact that salience increases the price of equality, which is the efficiency cost of a marginal increase in equality. Our approach could be applied to other settings in which utilitarian and procedural or deontological values conflict. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.30081 |
| By: | Christensen, Rasmus Corlin (Copenhagen Business School) |
| Abstract: | Reviews the debate over whether global tax multilateralism and international tax co-operation has survived current global trade upheavals, including whether such multilateralism is compatible with uneven application, and whether the design of international tax policy makes it resistant to breakdown. |
| Date: | 2026–05–26 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:cvw24_v1 |
| By: | Arpad Abraham; Pavel Brendler; Eva Carceles |
| Abstract: | Private retirement plans have become an increasingly important component of house hold wealth in the United States, with nearly two-thirds of Americans having access to employer-sponsored defined contribution plans. These plans have significant tax advantages, as both employee and employer contributions are tax-exempt, while the returns remain untaxed until their withdrawal during retirement. We develop a quantitative life-cycle model that incorporates both private and public pension systems, the life-cycle profile of homeownership, as well as a detailed tax-transfer system. Our model is able to replicate key empirical regularities, such as the observed distribution of private retirement wealth by age and income and the age and income dependence of pickup rates. We show that these subsidies lead to “new†savings in the long run, as they do not crowd out savings in other assets, while there is some crowding out in the short run. At the same time, eliminating these tax advantages leads to a wider tax base in the short run, which allows the government to reduce taxation, generating substantial redistribution towards current generations. |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:26/830 |
| By: | Andreas Fagereng; Luigi Guiso; Marius A. K. Ring |
| Abstract: | Using administrative panel data on Norwegian investors’ portfolios, we document strong but slow portfolio allocation responses to a persistent wealth-tax-induced shock to the equity premium. Short-run responses resemble the modest sensitivity documented using surveys. The longer-run responses are much larger and can be rationalized by moderate risk aversion. We document that equity premium shocks affect stock market entry but not exits, suggesting that entry costs dominate participation costs. Our finding of slow responses supports the asset-pricing literature that uses adjustment frictions to explain important asset-pricing puzzles, and has implications for optimal capital taxation when tax rates differ across assets. |
| JEL: | G11 G5 G51 H20 H31 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35262 |
| By: | Preyer Elisabeth; Kalcheva Desislava; Curtale Riccardo (European Commission - JRC); Tucci Michele (European Commission - JRC); Kučas Andrius; Bel Germà; Damian Alexandru Cristian; Łukomska Julita; Šķiltere Sanita; Chtioui Matthieu; Hesse Mario; Starke Tim; Lyytikäinen Teemu; Loiacono Luisa; Secomandi Riccardo; Gastaldi Francesca; Ferreira Joana; Sirvydis Viktoras; Kálmán Judit; Käärmann-liive Kaimo; Runtic Dario; Petrovici Norbert; Houlberg Kurt; Ramberg Ulf; Turley Gerard; Herrmann Benedikt (European Commission - JRC); Agundez Garcia Ana (European Commission - JRC); Von Ehrlich Maximilian; Sedmihradská Lucie |
| Abstract: | Municipalities shoulder the burden of creating business-friendly environments – managing infrastructure, navigating public resistance, and investing countless hours in smoothing the path for economic development. Yet, the rewards often flow elsewhere. Local taxes on economic activity offer a powerful solution. While a thriving local economy boosts budgets, different taxes shape municipal decision-making in distinct ways. This report examines how various type of taxes can serve as rewards for local economic development. To compare municipal tax revenues across countries, it introduces three dedicated indicators. To illustrate real-world impact, three case studies demonstrate how the sharing of direct taxes can catalyse local growth. Furthermore, there are strong indications that voluntary tax compliance rises when revenues remain local. In other words, rewarding local governments through tax sharing is a potential driver of both economic growth and fiscal compliance – benefiting citizens, businesses, and governments at all levels. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc145286 |
| By: | Joana Duran-Franch (OECD); Alvaro Leandro (OECD); Sébastien Turban (OECD); Nicolas Ruiz (OECD); Elisa Mitteldorf; Iris Smiderle (OECD) |
| Abstract: | This paper considers the short- and medium-term macroeconomic effects of a broad set of structural policy changes (corporate tax measures, marginal tax wedges, ALMP spending, employment protection legislation, rental market regulations, rail infrastructure investment, and basic research expenditure), building up on the baseline results presented previously in the overview of Foundations for Growth and Competitiveness (F4GC). Using recent econometric methods, it analyzes the robustness of these results and the potential heterogeneities in reforms impacts. The evidence suggests that many reforms deliver measurable short and medium run gains when assessed on the components of growth in GDP per capita. |
| Keywords: | employment, local projection methods, productivity, structural reforms |
| JEL: | C1 H2 O47 J18 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1867-en |
| By: | Luiz de Mello; Teresa Ter-Minassian |
| Abstract: | The ongoing increase in defence spending has important and uneven consequences for subnational governments, both through local economic spillovers and public-finance channels. The paper reviews evidence on national and local defence spending multipliers, finding that effects are often positive but vary with the composition of spending, the business cycle and local economic structure. It then examines how higher defence outlays by national governments, whether funded through revenue increases or cuts in other spending, or financed through borrowing, can affect subnational governments differently. These effects depending on various features of the intergovernmental fiscal relations system, such as revenue and spending assignments, and the design of intergovernmental transfers. The paper concludes that stronger intergovernmental coordination and place-based policies are essential to maximise benefits, mitigate adverse spillovers, and support regions exposed to adverse effects. |
| Keywords: | defence spending, fiscal multipliers, intergovernmental relations, regional spillovers, subnational governments |
| JEL: | H56 H77 R11 |
| Date: | 2026–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ctpaab:52-en |