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on Public Economics |
| By: | Lundberg, Jacob (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This paper studies the efficiency cost of pay-as-you-go pension systems. The return on pension contributions – typically average income growth – is lower than the market return on capital. Because the gap between these returns compounds over the life cycle, early-career contributions have a higher implicit tax rate. I develop a sufficient-statistics framework in which the deadweight loss depends on the age profile of implicit tax rates. Deadweight loss is minimized when the implicit tax rate is constant, mirroring the logic of tax smoothing. I then propose an implementation within a notional defined contribution design: contributions are valorized at a higher, market-based rate of return, while a lower fraction of contributions is credited to notional accounts and the remainder treated as a pure tax. Finally, I apply my deadweight loss formula to OECD PAYGO pension systems. Under the assumed parameter values, the deadweight loss averages 19 percent. I find that only 0.2 percentage points is attributable to the uneven timing of implicit taxation. |
| Keywords: | Pensions: Social security; Pay-as-you-go; Implicit taxation; Deadweight loss |
| JEL: | H21 H55 |
| Date: | 2026–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1568 |
| By: | Ramona Müller; Matthias Wrede |
| Abstract: | Local governments’ discretion over tax rates may be used strategically when politicians perceive that a tax burden falls differently across voter groups. We study this mechanism in the context of Germany’s property tax reform, which created exogenous variation in the tax across voter groups and municipalities by allowing states to adopt different property valuation models. Some federal states implicitly set a higher tax for rental properties than for comparable owner-occupied units. We show that, over an average post-announcement period of 3.6 years, municipal tax multipliers increased by 15 percentage points more when two conditions were met: municipalities were governed by homeowner-friendly parties and were located in states where tenants will face a higher tax base per square meter. By identifying political drivers behind sharp increases in German property tax multipliers in recent years, we provide causal evidence that higher-level governments’ tax-base choices change the electoral incentives governing local tax rates. |
| Keywords: | property tax reform, local tax setting, voter favoritism, political economy of taxation |
| JEL: | H20 H27 H30 H71 H73 R51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13067 |
| By: | Gundert, Hannah; Spix, Julia |
| Abstract: | A growing number of countries have introduced Digital Nomad Visas (DNVs) to accommodate the rise of location-independent remote work, often paired with tax incentives. Using simulation analysis, this paper examines the effective tax burden of digital nomads under DNVs in the EU. Results show that tax burdens are sensitive to host country choice, double tax treaty provisions, and duration of stay, with the 183-day threshold proving critical. Tax planning can generate substantial tax savings for digital nomads who relocate strategically. This raises tax fairness concerns, as host countries may bear costs associated with digital nomads without proportionate income tax revenue. |
| Keywords: | Digital nomad visas, Digital nomads, Personal income tax, Effective tax rates |
| JEL: | H24 H26 J61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:344103 |
| By: | Benjamin Jaros; Joshua Rauh |
| Abstract: | This paper examines the revenue and migration impact of the 2026 California Billionaire Tax Act, a one-time 5 percent tax on the worldwide net worth of individuals exceeding $1 billion. Using data from the Forbes Billionaire List, news reports detailing the residential real estate holdings of California billionaires, and public announcements of billionaire departures from the state, we estimate the behavioral response and associated revenue loss to this new tax using several different methodologies. Even before accounting for reductions in other tax bases such as the income tax, we estimate that the Act will collect approximately $30 billion (range $28 to 36 billion), less than a third of the $100 billion projected by Galle et al. (2025). This range accounts for the publicly confirmed taxpayer migration that has already eliminated nearly 30 percent of the Act's wealth tax base, applies a litigation-survival discount to the remaining base, and is validated by the wealth tax base elasticity literature. We estimate that California's billionaires contribute $3.3–5.8 billion annually in state income taxes. The present value of permanently lost income tax collections from departures more than offsets the one-time wealth tax revenue, yielding a net present value of negative $38.9 billion. Across 100, 000 simulated revenue and discount rate combinations, 85 percent of plausible outcomes produce a negative net present value of state revenues. |
| JEL: | H71 H73 R23 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35899 |
| By: | Lukyanov, Georgy; Ly, Hengrina |
| Abstract: | This paper studies the composition of taxation when the government cannot fully commit to respecting private returns after investment. A fiscal authority must finance a given expenditure from labor and capital income. Ordinary tax receipts are protected, but an opportunistic executive can seize part of the remaining capital payment. We show that a revenue-neutral increase in the capital tax raises the probability of compliance whenever the labor tax is below its local, fixedwage revenue peak, provided the equilibrium remains on a regular mixing branch. This result does not depend on the elasticity of substitution between capital and labor. The same reform can raise investment: the gain in expected retention must outweigh the decline in the opportunist’s continuation gain as compliance becomes less informative. We also characterize the Ramsey allocation conditional on full compliance. Limited commitment then imposes a ceiling on sustainable capital payments, rather than a general lower bound on the statutory capital-tax rate. Finally, we distinguish a change in the authority’s concern for the future from an increase in both actors’ patience. The former favors more informative policies when continuation welfare is convex; the latter has no unconditional direction in the reduced-form policy problem. |
| Keywords: | optimal taxation; limited commitment; expropriation risk; government reputation; tax composition; vulnerable tax bases |
| JEL: | H21 H30 D82 E62 C73 |
| Date: | 2026–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:132298 |
| By: | Anastasios G. Karantounias (University of Surrey); Vytautas Valaitis (University of Surrey) |
| Abstract: | This paper studies optimal time-consistent distortionary taxation with default. The government taxes labor income or issues non-contingent debt to finance an exogenous stochastic stream of fiscal shocks. Debt can be repudiated subject to default costs. Optimal policy is characterized by two opposing incentives that capture the double lack of commitment to old tax policies and to repaying debt, respectively: an incentive to postpone taxes by issuing more debt for the future (“Greed†), and an incentive to tax more currently to avoid punishing default premia (“Fear†). A Generalized Euler Equation captures these forces and determines the optimal back-loading or front-loading of tax distortions. Even with small default risk, tax-smoothing and debt issuance are substantially limited when short-term debt is available. The same mechanisms operate in environments with long-term debt, but debt serves more as a fiscal absorber. |
| JEL: | D52 E43 E62 H21 H63 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0626 |
| By: | Snowdon, Christopher |
| Abstract: | The Laffer curve illustrates a principle understood since Adam Smith: beyond a certain point, raising a tax rate reduces the revenue it brings in. Overall tax revenue in the UK has risen as the tax burden has grown, but several individual taxes now appear to have been pushed into this 'prohibitive range'. Alcohol duty, tobacco duty and landfill tax were all expected to raise more money after rate rises. Instead, alcohol duty receipts fell despite significant inflation, real-terms tobacco duty revenue fell by 40% between 2021 and 2025 as smokers turned to the black market, and landfill tax now raises half as much in real terms as it did at its 2013 peak, while fly-tipping has reached record levels. Together, these three taxes yielded £5.2 billion less than the OBR projected. This points to an over-reliance on static models that fail to anticipate how people respond to excessive taxation. Pushing taxes too far not only loses revenue but creates huge opportunities for criminals, and the cost of dealing with them falls on the public. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ieadps:344094 |
| By: | Radhika Goyal; Anders Jensen; David Lagakos; Abdoulaye Ndiaye; Yuntian Zhao |
| Abstract: | This paper examines the role of government capacity to collect taxes in driving economic development. We first draw on a new macro-historical database to document that tax collections relative to tax administration expenditures rise sharply with GDP per capita. We then interpret this finding in a neoclassical growth model with a tax administration sector in which labor inputs are required to raise tax revenues. Countries differ in their levels of tax productivity, capturing how effectively labor is used to raise taxes, as well as their levels of productivity in creating consumption and investment goods. Governments use tax revenues to provide public capital that complements private factors in production and to make transfers. Quantitatively, our model predicts that increases in tax productivity in low-income economies can raise GDP per capita substantially more than suggested by Hulten’s theorem. |
| Keywords: | tax productivity, growth, development, fiscal capacity, Taxation, ramsey taxation |
| JEL: | E62 H21 H54 H83 O11 O23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13061 |
| By: | Subhrasil Chingri (Indian Institute of Technology Delhi); Debasis Mondal (Indian Institute of Technology Delhi); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper studies optimal robot taxation in a static model with routine and non-routine workers. Robots substitute for routine workers and complement non-routine workers. In addition, robots are produced in a monopolistic sector that charges a markup over marginal cost. In the absence of monopoly power, the optimal robot tax rate is zero. When robot producers have monopoly power, the optimal policy corrects the markup distortion by aligning the effective robot price with marginal cost, conditional on the labor supply induced by the income tax system. The wage premium rises with the expansion of the tasks that robots can perform and declines with higher robot production costs. The results clarify the conditions under which robot taxation serves as a corrective instrument. |
| Keywords: | Robot taxation, automation, optimal taxation, corrective subsidies, monopoly markups, wage inequality |
| JEL: | H21 H23 O33 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp399 |
| By: | Henk Kox; Arjan M. Lejour |
| Abstract: | International corporate tax avoidance is facilitated by sovereign jurisdictions that function as tax havens, financial secrecy havens, or offshore financial centres. The active policies of these jurisdictions potentially erode the tax basis of other countries, create an uneven playing field for domestic and multinational firms, and undermine international fiscal cooperation. However, the definition and identification of such sovereign facilitators of tax avoidance is --in both policy documents and academic literature-- surrounded by a lack of agreement. Traditional lists of tax havens are seldom updated, have no time variance, and often ignore tax havens among rich countries. This paper proposes the Joint Dynamic Identification Framework (JDIF), a standardised method that simultaneously identifies tax havens, financial secrecy havens, and offshore financial centres. Using only five statistical indicators makes it easy to apply this identification tool. We present a full-fledged proof-of-concept, covering the period 2001-2022 and more than 200 jurisdictions. The JDIF method shows that the pattern of border-crossing corporate tax avoidance is highly dynamic. Individual jurisdictions sometimes change their specialisation in tax avoidance networks. The JDIF method reveals shifting patterns between groups of tax-avoidance-facilitating jurisdictions and generates data that can be used in network analysis. Several robustness tests show the validity of our findings and demonstrate its policy relevance. |
| Keywords: | identifying sovereign facilitators, corporate tax avoidance, policy tool, tax havens, financial secrecy havens, offshore financial centres, network analysis |
| JEL: | H32 E62 C82 G32 F23 F42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13065 |
| By: | White, Justin (Department of Health Law, Policy & Management, Boston University); Xu, Ziyue (Department of Health Law, Policy & Management, Boston University); Hamad, Rita (Department of Social and Behavioral Sciences, Harvard T.H. Chan School of Public Health); Parolin, Zachary (The Institute for New Economic Thinking at the Oxford Martin School, University of Oxford) |
| Abstract: | States increasingly supplement the federal Child Tax Credit (CTC) with credits that vary in generosity, refundability, and earnings requirements. We examine changes in parental employment, labor force participation, and work hours following state CTC adoption using the Current Population Survey Annual Social and Economic Supplement (CPS-ASEC), 2004–2026. Our preferred stacked difference-in-differences design includes 12 adopting states with complete event-time support and compares them with never-treated states and states that adopted after our evaluation window. Averaging over the first three post-adoption survey years, the estimated effect is 0.05 percentage points (SE 1.03) for employment and −0.46 points (0.82) for labor force participation; estimates for work hours are also close to zero. Across secondary specifications and CPS Basic Monthly analyses, extensive-margin estimates were similarly small. Larger simulated benefits are associated with fewer hours among employed parents, but the relationship is also evident before adoption and may partly reflect how benefits depend on earnings. Overall, the estimates provide little indication that state CTC adoption has substantially reduced parental employment, although meaningful effects in either direction cannot be ruled out under moderate departures from parallel trends. |
| Keywords: | Child Tax Credit, labor supply, employment, state policy, difference-in-differences, tax credits |
| JEL: | H24 I38 J22 H75 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2026-28 |
| By: | Jakobsen, Katrine; Kleven, Henrik; Kolsrud, Jonas; Landais, Camille; Munoz, Mathilde |
| Abstract: | Using administrative data from Scandinavian countries, we provide evidence on international migration responses to wealth taxes and evaluate their aggregate economic implications. We find significant migration responses among the wealthy: a 1pp increase in the top wealth tax rate decreases the stock of wealthy taxpayers by about 2%. A large fraction of the wealthy are business owners, and their businesses are negatively affected by owner out-migration. The aggregate effects are nevertheless modest: the migration responses to a 1pp increase in the top wealth tax rate reduce employment by 0.02%, investments by 0.07%, and value-added by 0.10%. |
| JEL: | D31 E22 E24 F22 H24 K34 |
| Date: | 2026–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130959 |
| By: | Paolo Panteghini |
| Abstract: | The new view of dividend taxation bundles three logically distinct claims: capitalisation, that a permanent dividend tax is impounded in share values; the Auerbach prediction, that the firm's real retention and investment decision is unchanged; and the King criterion, that the tax does not enter the cost of capital. In a frictionless two-period general-equilibrium economy with an all-equity firm and a power production technology, we show that the three claims hold under progressively stronger conditions. Capitalisation always holds, since the tax cancels from the firm's investment first-order condition, and in partial equilibrium Fisher separation delivers the new view in full. The failures are general-equilibrium phenomena that sort by margin: a subsistence level of consumption in otherwise standard HARA preferences breaks the Auerbach prediction for any technology, whereas the King criterion fails only when returns to capital are also decreasing, with a magnitude proportional to the product of technological curvature and the subsistence level. These breaks are uncompensated income effects, not substitution distortions: a revenue-neutral lump-sum rebate restores neutrality for any preferences and any technology. No friction is needed, only the curvature of preferences and technology and the breakdown of Fisher separation when the firm is the sole store of value. The all-equity assumption is inessential; under risk, by contrast, an asymmetric loss offset distorts the price of risk, a substitution distortion that no lump-sum rebate can repair. |
| Keywords: | new view, dividend taxation, general equilibrium, preferences, decreasing returns, tax neutrality |
| JEL: | H24 H25 H32 E21 E62 G35 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13055 |
| By: | Maher, Luke |
| Abstract: | In late 2023, Warner Bros. Discovery announced that it would be permanently shelving Coyote vs. Acme, a complete and hotly anticipated film about popular Looney Tunes characters. This announcement was widely understood—and admitted by Warner Bros. Discovery in its Securities and Exchange Commission filings—to be motivated, at least in part, by a desire to “write off” the film’s costs for tax purposes. This Article is the first to (1) provide a full account for the tax rules that govern what constitutes a “loss” for purposes of unreleased creative works, (2) evaluate whether those rules make sense from both a technical and policy perspective (concluding that they do not), and (3) compare the relative merit of other approaches to allowing tax losses for unreleased creative works. In so doing, this Article makes two necessary contributions to current tax scholarship: first, it links the robust property scholarship on waste to tax policy, setting forth a framework through which critical reappraisals of long-entrenched tax laws and policies can be conducted, identifying ossified policies that no longer comport with our policy goals and revenue-raising needs and developing ways to improve them. Second, it also offers guidance in the ways that the law can think about the ownership, abandonment, and taxation of intangible assets. |
| Date: | 2026–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:osf:lawarc:a2pwg_v1 |
| By: | Johannes Geyer; Peter Haan; Lukas Harder |
| Abstract: | Progressive pension supplements mechanically reduce the gender pension gap because women receive lower pensions on average. However, labor supply responses may offset these gains and create fiscal externalities. Using German administrative data, we analyze the distributional and welfare effects of a progressive pension supplement. We find no labor supply responses during working life, but small effects on women’s employment and earnings in retirement. The supplement reduces the gender income gap by about two percent, with sizable heterogeneity across pension levels. The marginal value of public funds is 0.83. Means-testing based on household income improves welfare even with low redistributive preferences. |
| Keywords: | gender, pensions, retirement, labor supply, redistribution |
| JEL: | H55 H23 J16 J26 J22 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2185 |
| By: | Aris Avgousti (Central Bank of Cyprus); Charalambos Michael (Central Bank of Cyprus); Georgiana Photiadou (This work was completed during the author's tenure at the Central Bank of Cyprus (2025-2026).) |
| Abstract: | This paper assesses the distributional and fiscal implications of Cyprus's 2026 personal income tax (PIT) reform. The analysis is motivated by the fact that major tax reforms can reallocate disposable income across households with heterogeneous consumption and saving behavior, and different balance-sheet characteristics. From a central bank perspective, such distributional shifts are relevant because they can influence the strength and composition of monetary policy transmission (cash-flow versus financial channels) and may interact with household leverage, with potential implications for financial stability. Using tax-benefit microsimulations combined with confidential household microdata, the effect of PIT bracket amendments and two income-dependent tax allowances (for dependent children and university students and for mortgage interest or rental expenses) is evaluated. The results indicate uneven gains across the income distribution. Given that a large share of taxpayers is below the pre-reform tax-free threshold (EUR19, 500), simulated gains for the bottom income groups are minimal. The largest gains accrue to upper-middle-income and high-income households, while lower-middle-income and mid-middle-income households experience relatively modest benefits. The estimated fiscal cost of the PIT measures included in the analysis is around EUR240 million. Alternative configurations of the upper PIT brackets could have reduced gains at the top of the income distribution and preserved fiscal space for other policy priorities. |
| Keywords: | Cyprus; personal income tax reform; distributional impact; fiscal impact; microsimulation; EUROMOD |
| JEL: | H24 H22 D31 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cyb:wpaper:2026-2 |
| By: | Bonfanti, Giovanni |
| Abstract: | Fiscal integration in a currency union is generally understood as a transfer from fiscally strong to fiscally weak countries. I show that this changes when common debt is paired with a non-defaultable common tax, even if national debt remains defaultable. The risky country gains from intertemporal trade: it receives a grant financed by a perpetual obligation it discounts more heavily than lenders do. The cost to the safe member is second-order and the tax removes it by insuring imperfectly correlated cycles rather than transferring resources in expectation. The calibration delivers a narrow Pareto-improving region: the tax that eliminates the risky country’s perverse incentive to default is negligible, while the tax that compensates the safe country is an order of magnitude larger. Joint spending on a public good expands the region and reverses that ordering: the safe country gains even before the common budget balances. JEL Classification: F34, F36, F45, H63, H87 |
| Keywords: | common debt, fiscal union, non-defaultable taxation, Pareto improvement, sovereign default |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263297 |