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on Public Economics |
| By: | Ben Tippet (King’s College London); Gabriel Zucman (Paris School of Economics; University of California, Berkeley) |
| Abstract: | The super-rich in the UK, like in many OECD countries, pay lower effective tax rates than ordinary workers. At the same time, the wealth of the richest 300 households has increased from around 5% of GDP in 1989 to 16% today. This report presents a response to these challenges: a minimum 2% average annual tax on the total wealth of households with more than £100 million in wealth. The tax would raise around £10 billion in 2026, equivalent to 0.3% of GDP and almost one-third of the projected government current budget deficit. As only the richest 1000 households would be taxed, the usual criticisms against historic wealth taxes – administrative infeasibility, tax evasion, valuation problems, illiquid assets and a dampening of business innovation – do not hold. The proposal would include a 10 year post-emigration period under which households would remain liable for the tax, building on recent similiar changes to inheritance taxes. Given the small numbers of households involved, the tax could be implemented quickly to stop preemptive flight. Revenues remain substantial under a range of alternative assumptions regarding the tax model and behavioural responses. |
| Keywords: | Wealth taxation; Wealth inequality; Super-rich; Tax avoidance; Tax migration; UK taxation; Tax progressivity |
| JEL: | H24 H26 D31 D63 H21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:046 |
| By: | Alexander Hansak (University of Graz, Austria) |
| Abstract: | This paper studies how endogenous tax compliance changes the incidence of capital taxation when households earn heterogeneous returns. I develop an incomplete-markets heterogeneous-agent model in which households save, invest in entrepreneurial activities, and can conceal capital-side tax liabilities. Disciplined by U.S. evidence, the model quantifies how concealment creates a wedge between statutory and effective capital taxation and how this wedge interacts with return heterogeneity, the statutory tax rate, and the choice of tax base. Changing the tax base generates a substantial endogenous compliance response: replacing the capital-income tax with a revenue-equivalent wealth tax reduces the liability-weighted concealment rate from 15.9% to 3.3% and raises long-run welfare. The difference between statutory and effective taxation also becomes increasingly important at high capital-income tax rates. At a 40% statutory rate, output is nearly 7% higher with endogenous evasion than under perfect compliance, while capital-tax revenue is about one third lower. Finally, transition dynamics under a balanced-budget fiscal closure reveal a distinct fiscal-timing margin. Abolishing capital-income taxation raises long-run welfare but lowers welfare of households alive at implementation, whereas the wealth-tax replacement raises welfare both at implementation and in the long run. The incidence of capital taxation therefore depends jointly on statutory tax policy, endogenous compliance, and the dynamics of fiscal adjustment. |
| Keywords: | Tax evasion, Tax enforcement, Capital income taxation, Wealth taxation, Heterogeneous returns, Wealth inequality |
| JEL: | H21 H22 H26 E21 E22 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-20 |
| By: | Henrik Kleven; Owen M. Zidar |
| Abstract: | We characterize optimal labor and capital income taxation in a task-based model of automation. Workers and machines are perfect substitutes in automatable tasks, which run from the bottom of the skill distribution up to a threshold. Workers supply labor on the extensive margin. Capitalists supply machines at a finite elasticity. In this general-equilibrium automation economy, optimal tax formulas take canonical partial-equilibrium forms. Yet automation substantially changes optimal tax rates because wages and capital returns are endogenous. We calibrate the model to the US wage distribution and automation exposure. In equilibrium, the middle class is the most automated, with machine intensity peaking around the 40th wage percentile. Relative to a no-automation benchmark, the optimal labor tax schedule is more progressive: a larger EITC subsidy at the bottom, lower taxes in the middle, and higher taxes at the top. The optimal capital tax is sizable but unaffected by automation. |
| JEL: | H21 H31 H32 J21 J31 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35747 |
| By: | Jasper Boll (Paris School of Economics); Emmanuel Saez (University of California Berkeley); Gabriel Zucman (Paris School of Economics and UC Berkeley) |
| Abstract: | This paper documents the wealth of California’s billionaires and the taxes they pay. California billionaires’ wealth exceeds $2 trillion today, the equivalent of 50% of California’s GDP. It has grown 144% from 2023 to 2025, fueled by the AI boom. Over the longer run, the real wealth of California’s billionaire class—the 0.0002% richest households—has been multiplied by 38 from 1982 to 2026, while average real family income in California has about doubled. California billionaires pay about 0.2% of their wealth in California income tax ($3.2 billion/year), representing 2.4% of total California income tax revenue on average over 2023-2025. Using Securities and Exchange Commission data from Alphabet, Meta, Oracle, and Nvidia since 2004, we estimate the trajectory of wealth, income, and taxes paid by the top 4 California billionaires—Page, Brin, Zuckerberg, Ellison (through 2020), and Huang (since 2021)—focusing on their business wealth. This group alone holds nearly $1 trillion in business wealth, about 40% of total California billionaire wealth. For this group, wealth growth (+322% over 2023-2025) and low taxation (0.04% of wealth in annual California income tax) are more pronounced. The proposed one-off California billionaire tax of 5%, payable over 5 years, is both small relative to California billionaires’ wealth gains and large relative to the taxes they currently pay. We estimate that it could raise about $100 billion, with comparatively minor impacts on income tax revenue. Using empirical estimates of mobility responses to wealth taxation, we find that an annual wealth tax on California billionaires could raise substantial additional revenue even after accounting for income tax losses due to mobility. |
| Keywords: | Wealth taxation; Wealth inequality; Taxation of high-net-worth individuals; Effective tax rates; Tax migration; Wealth concentration |
| JEL: | D31 H24 H21 H26 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:045 |
| By: | George-Marios Angeletos; Matias Bayas-Erazo |
| Abstract: | We study optimal commodity taxation when consumers are rationally inattentive and the planner internalizes their attention costs. In our setting, consumers may underreact to taxes, may allocate attention unevenly across goods, and may display sparse behavior or mental accounting. Our main result is that this need not change tax design: in a benchmark, optimal taxes satisfy the same sufficient-statistics formulas as in classical public finance, regardless of the extent and endogeneity of inattention. Away from this benchmark, we offer a dual rationale for state-dependent taxes and a new lens on tax salience; but we still find no room for the adjustments emphasized in recent work on behavioral public finance. |
| JEL: | D03 D90 E03 H21 H23 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35741 |
| By: | Eren Gürer |
| Abstract: | This paper studies optimal taxation when marginal contributions to an externality differ between urban and rural regions (non-atmospheric externalities), and individuals can migrate from rural to urban regions to earn higher wages. I show that when the government is constrained to set a uniform commodity tax across regions, the presence of externalities alters the structure of optimal redistribution. In particular, if, for example, urban residents impose higher marginal external damages, the optimal policy features more redistribution, relative to a benchmark without externalities. This additional redistribution reduces the attractiveness of higher urban wages and thus discourages migration into the urban region. These findings highlight a potential role for redistributive policy in internalizing externalities. |
| Keywords: | taxation, redistribution, regional externality, migration |
| JEL: | H21 H23 R23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12987 |
| By: | Marius Ring (UT Austin); David Seim (Stockholm University); Gabriel Zucman (Paris School of Economics and UC Berkeley) |
| Abstract: | Tax avoidance through personal holding companies has long been viewed as a key challenge for progressive income taxation. We exploit twenty years of administrative micro-data linking firms to owners in Sweden and Norway to analyze how the use of personal holding companies varies across the income distribution and to quantify its implications in a quasiexperimental setting. About half of the income of the top 0.1% is retained in personal holding companies defined, as in US tax law, as firms for which five or fewer owners own more than 50% of the stock and that derive more than 60% of income from investment income. Event studies of shocks to operational firms’ value-added show that holding companies shield around half of dividend distributions from individual income taxation. Profits tend to remain in holding companies for long periods of time, with cumulative payout rates of 15%–20% over two decades for the highest income groups. Wealth taxes do not provide an effective backstop due to the low valuation (or exemption) of shares in private businesses. As a result, effective tax rates, all taxes included, fall from about 50% for the upper middle class to about 15%–20% among the highest-net-worth individuals. Accounting for income in holding companies erases half of the difference in the 1980–2020 rise of the top 1% fiscal income share between Nordic countries and the United States, where rules penalizing the use of holding companies have been in place since the 1930s. |
| Keywords: | tax avoidance, distributional tax analysis, inequality |
| JEL: | D31 H26 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:047 |
| By: | Berman, Yonatan; Klor, Esteban F. |
| Abstract: | In this paper, we analyse the effects of dividend tax reforms on tax revenues, income shifting and earnings retention. We examine two significant policy changes in Israel during the 2010s. Using administrative tax records, we study a permanent increase of 5 percentage points in the dividend tax rate in 2012 and a temporary tax relief enacted in 2017. The permanent tax hike triggered an immediate surge of over 100 per cent in reported dividend income and tax revenues. It did not generate a lasting shift in dividend flows. In contrast, the temporary relief of 2017 led to a sharp decline in dividend payments upon its expiration. Notably, dividend payments remained depressed after the preferential rate ended, consistent with increased earnings retention and possibly with anticipation of similar future relief. Finally, our counterfactual estimates imply that post-2017 retention increased the downward bias in the reported top 1 per cent income share by 1–2 percentage points because income retained within firms is absent from personal tax records. |
| Keywords: | capital tax reform;income shifting;retained earnings |
| JEL: | J1 F3 G3 |
| Date: | 2026–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140934 |
| By: | Giulia Aliprandi (International Tax Observatory); Teona Cretu (International Tax Observatory); Vytautas Valuta (International Tax Observatory) |
| Abstract: | The European Union's Public Country-by-Country Reporting (CbCR) Directive aims to make where multinationals operate and where they pay tax visible to investors, regulators, and the public. This report asks whether the Directive delivers on that objective, examining three questions: does the regime add new public information, how complete is the disclosure, and how much of multinational activity does its geographical design make visible? Using the first comprehensive dataset of public CbCR filings under the Directive — 144 multinationals from 24 headquarters countries, covering financial years 2023 and 2024, for a total of 164 reports, drawn from Romania's early transposition — three findings emerge. First, the Directive adds new public information, since most multinationals now publishing have no prior voluntary disclosure history, but coverage falls short of its theoretical scope: only 20% of the 569 non-EU multinationals estimated to be in scope have published a report. Second, 38% of reports are incomplete, most commonly limited to Romania only, driven mainly by parent non-cooperation and safeguard clause invocations. Third, the Directive's geographical design leaves a large share of multinational activity aggregated into a residual "Others" category, which absorbs 71% of profits and 74% of revenues in the Romanian data. The report recommends the Commission's review prioritise widening disclosure, addressing parent non-cooperation, and establishing a centralised repository for filings. |
| Keywords: | Public country-by-country reporting; Country-by-country reporting; Tax transparency; Corporate tax transparency; Multinational enterprises; Profit shifting; Tax avoidance; EU tax policy; Tax disclosure; Base erosion and profit shifting |
| JEL: | H25 H26 F23 K34 M41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:report:011 |
| By: | Michael Devereux (Oxford University Centre for Business Taxation); Ben Lockwood (University of Warwick); Erez Yerushalmi (Birmingham City University) |
| Abstract: | We analyze the relative desirability of R&D tax credits (TCs) and patent boxes (PBs) as instruments for stimulating R&D, in a setting which allows for several organizational forms within the R&D sector and where there are several market failures, all of which imply under-investment in R&D. There are two key features of the model. The first is that it is a closed economy, so the (international) profit shifting role for the PB is absent. The second is that there may be an unobservable input to R&D (e.g. managerial effort) that cannot be subsidized by a TC. The government can choose a TC, a PB, and also the main rate of CIT. We find that (i) when the unobservable input is absent, a PB should never be used, but a TC may be, if market failure is severe enough; (ii) when the unobservable input is present, the optimal policy depends on the need for tax revenue, as measured by the MCPF. When this is low, the TC should never be used, but a PB may be, but as need rises, both instruments should be used, and when it is very high, only a TC should be used. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1625 |
| By: | Alice Chiocchetti (Paris School of Economics, Institute for Public Policies); Ninon Moreau-Kastler (Paris School of Economics, International Tax Observatory) |
| Abstract: | The extraction of oil, gas, and minerals generates large economic rents, yet it remains unknown how commodity price windfalls are distributed across the global networks of multinational enterprises (MNEs) that dominate production in most resource-rich countries. We study this question by combining administrative records covering the worldwide profits, revenues, and employees of large MNEs across all jurisdictions, with comprehensive data on their physical extraction activity at the affiliate level. Extractive MNEs have a substantial presence in countries in which they do not extract: downstream and consumption countries, as well as low-tax jurisdictions. Combining differences in firms’ commodity specialization with heterogeneous market price changes in a shift-share design, we find that windfall profits are partly diverted to low-tax jurisdictions. For every additional dollar of consolidated windfall profit, $0.8 accrues to extractive affiliates, $0.2 to tax havens, and nothing to the rest of the group. This diversion intensifies during booms: the share of profits booked in tax havens rises by one percentage point for every 10% increase in group profitability. |
| Keywords: | multinational enterprises |
| JEL: | H25 H26 F63 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:044 |
| By: | Felix J Bierbrauer (Université de Cologne); Pierre C Boyer (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Andreas Peichl (LMU - Ludwig Maximilian University [Munich] = Ludwig Maximilians Universität München); Paul Vanborre (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | How much defense spending should we provide, and how should we finance it? How much political support among citizens for defense spending should we expect? These are pressing questions to address as defense spending is set to go up substantively in the coming years with the goal of achieving self-sufficiency and EU sovereignty. National defense is the textbook example of a pure public good. We review insights from the theory of pure public goods to identify challenges for an efficient provision and financing of national defense. Key insights are: (i) The citizens' willingness to pay taxes for national defense depends on the design of distributive policies (ii) Pareto efficiency requires responsiveness to the preferences of citizens who pay for public goods via the tax system, (iii) An increase of national defense spending may go hand-in-hand with additional redistribution and (iv) uncertainty about the citizens' willingness to pay for increased defense spending implies uncertainty about the political feasibility of reform packages. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:ipppap:halshs-05543774 |
| By: | Chizmar, Stephanie; Parajuli, Rajan; Lamichhane, Sabhyata; Frey, Gregory E.; MacFarland, Katherine; Pinyan, Mary; Teague, Suzanne |
| Abstract: | Agroforestry practitioners face numerous barriers, including narrowly focused agricultural and forest land support programs that are targeted toward conventional crop and timber production. Preferential property tax programs (PPTPs) are one of the critical support programs that offer economic relief for landowners of enrolled lands. However, eligibility criteria for these programs may prevent inclusion of agroforestry lands, and thus, disincentivize the diversification of working lands. This study reviewed State statutes, administrative rules, tax guides and manuals, and other supporting publications to determine the compatibility of PPTPs for agricultural, forest, and horticultural lands with the characteristics of agroforestry systems. Results suggest that at least one of the five agroforestry practices of interest may be eligible for preferential assessment in each of the 50 States. PPTPs for agricultural lands may welcome a mixed agriculture-forestry interface more than PPTPs for forest lands. Silvopasture was found to be the most common practice potentially allowed under the preferential tax classifications. Productivity and land cover requirements and prohibited activities were identified as the primary limiting factors restricting eligibility of agroforestry practices. The findings from this study may be used to inform discussions related to landowner decision making and natural resource policy. |
| Keywords: | Agricultural and Food Policy, Crop Production/Industries, Land Economics/Use, Livestock Production/Industries, Resource/Energy Economics and Policy |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ags:usdami:412744 |