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on Public Economics |
| By: | Koch, Reinald; Ostermann, Leon; Spengel, Christoph |
| Abstract: | This paper examines how jurisdictions have responded to the introduction of the OECD Pillar Two framework and analyses the implications of these developments for international tax competition. Using a comprehensive dataset covering 223 tax systems, we examine the global implementation of Pillar Two mechanisms, the development of statutory corporate income tax (CIT) rates between 2015 and 2025, the redesign of tax incentives, and the extent to which Pillar Two establishes a level playing field for multinational enterprises. The findings reveal substantial asymmetries in the implementation and practical operation of Pillar Two. By 2026, only a limited group of jurisdictions had implemented all major Pillar Two mechanisms, although implementation is considerably more widespread among European countries. At the same time, the long-run decline in statutory CIT rates appears to have slowed following the 2021 Pillar Two agreement. However, low-tax jurisdictions continue to compete through alternative channels, including substance-based tax incentives and preferential regimes designed to interact favourably with Pillar Two rules. Overall, the evidence suggests that Pillar Two is unlikely to eliminate international tax competition but instead may fundamentally reshape its structure. At the same time, heterogeneous implementation across jurisdictions creates the risk that the regime amplifies existing international differences in effective corporate taxation rather than establishing a genuinely level global playing field. |
| Keywords: | Global Minimum Tax, tax competition, firm competition, corporate tax law |
| JEL: | H25 K34 F23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:343044 |
| By: | Stenkula, Mikael (Research Institute of Industrial Economics (IFN)); Wykman, Niklas (Örebro University School of Business and) |
| Abstract: | Sweden’s dual income tax (DIT) system, introduced through the 1990–1991 tax reform, relies on income-splitting rules for active owners of closely held corporations to limit income shifting. This article quantifies how the tax system has shaped investment incentives and tax neutrality since the reform. Using an extended King–Fullerton framework, we construct annual marginal effective tax rate (METR) series for a marginal investment, distinguishing financing through new equity, retained earnings, and debt, and allowing for different rates of return and owner income positions. The results show substantial non-neutrality and pronounced time variation, especially for new equity. Debt is typically tax-favored, while new equity can be favored over retained earnings at low returns but becomes less favorable at higher returns as more surplus is taxed as labor income. Inflation materially affects long-run comparisons and short-run fluctuations. The analysis is relevant for other DIT countries designing anti-shifting regimes for owner-managed firms. |
| Keywords: | Cost of capital; Marginal effective tax rates; Dual income tax; Income splitting rules |
| JEL: | G35 H24 H25 H26 |
| Date: | 2026–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1565 |
| By: | Joshua Coven (CUNY Baruch College); Sebastian Golder (New York University); Arpit Gupta (New York University); Abdoulaye Ndiaye (New York University, Stern School of Business) |
| Abstract: | Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families. Raising them reallocates housing toward the young through two channels: capitalization into lower prices reduces required down-payments for financially constrained buyers, a form of embedded leverage, while higher tax obligations raise holding costs for older owners. In our overlapping generations model, raising California's property taxes to Texas levels increases young homeownership while decreasing elderly homeownership. Removing step-up basis also lowers elderly homeownership, suggesting their tenure is sustained by bequest tax advantages. The tax treatment of housing shapes housing allocation across generations. |
| Keywords: | housing affordability, housing inequality |
| JEL: | H71 R21 H24 J11 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:hka:wpaper:2026-010 |
| By: | Katy Bergstrom; William Dodds |
| Abstract: | Saez and Stantcheva (2016) proposed evaluating tax reforms using generalized welfare weights, which encode the social value of giving a dollar to each person, to incorporate non-utilitarian values without specifying a social welfare function. However, Sher (2024) showed that generalized welfare weights cannot both incorporate non-utilitarian values and evaluate tax reforms consistently (in the sense that they do not generate preference cycles). We show that by relaxing a restriction imposed by both Saez and Stantcheva (2016) and Sher (2024) on how weights vary with the tax schedule, the generalized welfare weight approach can achieve both of these objectives. We characterize when weights are consistent: a policymaker with consistent generalized welfare weights necessarily behaves as if they were determining desirability of tax reforms via a well-defined global objective function, even if they never wrote one down; we show consistency can be checked via a symmetry condition. We also show that consistency does not require the policymaker to specify the underlying objective: any set of mechanical weights (society's valuation of a dollar transferred to each person, holding behavior fixed), utilitarian or not, can be completed into consistent generalized welfare weights by adding a term that captures the implicit value of behavioral responses. Our results are robust to multidimensional tax schedules and heterogeneity, behavioral agents, general equilibrium effects, and non-smooth behavioral responses such as bunching. |
| Keywords: | welfare weights, generalized social marginal welfare weights, consistency, transitivity |
| JEL: | D60 D63 D71 H21 H23 I31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12978 |
| By: | Doorley, Karina; Gubello, Michele |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:esr:wpaper:wp829 |
| By: | Enea Baselgia; Remo Gurtner; Julian Koller; Isabel Z. Martínez; Isabel Z. Martínez |
| Abstract: | This paper analyzes the composition and distribution of national income, private wealth, and the extent of redistribution in Switzerland from 2003 to 2022, combining micro tax, survey, and national accounts data. Constructing Distributional National Accounts (DINA) requires addressing two features of the Swiss setting. Switzerland is a tax haven, so we correct for cross-border profit shifting by multinationals. It is also fiscally decentralized. Lacking nationally representative tax microdata, we reweight cantonal micro tax records to match national distributions. We find that pre-tax income inequality is substantially higher than suggested by tax statistics: the top 1% income share increases by 50% once retained earnings and privileged dividends are included. Compared to previous estimates, wealth inequality is somewhat higher but shows no upward trend. The overall Swiss tax-and-transfer system is close to flat across most of the distribution, at around 45% of pre-tax income, declining to below 30% for the top 0.01%. |
| Keywords: | inequality, distributional national accounts, redistribution, Switzerland |
| JEL: | E01 D31 H2 H5 H77 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12977 |
| By: | Peter A. Diamond |
| Abstract: | Public pension systems are long-term social contracts operating under persistent economic, demographic, and political uncertainty. Periods of turbulence, marked by financial shocks, changes in longevity, and shifting labour markets, test the capacity of pension institutions to adapt while maintaining adequacy, equity, and legitimacy. Building on earlier joint work on pension economics and reform with Nicholas Barr, this chapter analyses the role of automatic and semi-automatic adjustment mechanisms in public pension design. Drawing on comparative experience from Sweden, Canada, and the United States, we examine mechanisms for maintaining financial balance, the incorporation of life expectancy into retirement age and benefit design, and the accumulation and drawdown phases of defined contribution pensions. We argue that well-designed automatic mechanisms can discipline political decision-making and improve resilience, but only if they are proportionate, transparent, and attentive to distributional and intergenerational consequences. In turbulent times, good pension design does not eliminate the need for political choice; rather, it structures that choice so that adjustment can occur without repeated crises. |
| JEL: | H55 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35693 |
| By: | Georgy Lukyanov; Hengrina Ly |
| 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, fixed-wage 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. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.19764 |
| By: | Muellbauer, John |
| Abstract: | The Starmer government's 2025 Budget introduced the government's High Value Council Tax Surcharge (HVCTS), which is an addition to an unchanged Council Tax. It is designed to apply on the amount of value above £2m and the Valuation Office Authority has been tasked with finding and valuing those properties. The VOA has proposed it will initially trawl through homes it estimates to be worth more than £1.5m to winnow out those worth £2m on more refined estimates. The HVCTS is planned to become live in 2028 but was subject to a public consultation, which concluded in July. As I argued in the Financial Times in January this year, Muellbauer (2026a), the design of the HVCTS is seriously flawed: it retains the principle of price bands, and associated cliff-edges, and caps the amount of tax collected at the upper end of the market. The other problem is leaving Stamp Duty in place for those properties, not taking the opportunity for joint reform, so missing the efficiency gains from the reduction in market frictions. Andy Burnham has signalled a major shift in the focus of policy towards reducing regional and generational inequality, improving housing affordability while boosting growth, an agenda a joint reform of the HVCTS, combined with a cut in Stamp Duty would advance - and raise significantly more revenue than Rachel Reeves' version of HVCTS. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2026-24 |
| By: | Tatar, Balint; Wieland, Volker |
| Abstract: | The German economy has been in stagnation for some time while the government is faced with high and rising costs of the social security system, defence and interest on debt. Structural reforms are needed to stabilize the social system and to strengthen potential growth. The recent reform package proposed by the German Pensions Commission represents an important step forward. Among other changes, it introduces a capital-funded element, which will help stabilize the existing pay-as-you-go statutory pension system. However, this will be financed by an increase of social security contributions on the order of 2 percentage points, which will dampen economic growth. According to our analysis using a large-scale structural macro model, the increase in contribution rates raises the cost of labour and may reduce GDP all else equal by approximately 0.6 percent in the medium term. The three economies in the model are calibrated to Germany, the rest of the euro area and the rest of the world. Spillover effects to the rest of the euro area remain very small. Our findings should not be understood as an argument against the much-needed pension reform, but should rather be taken to further strengthen the case for additional growth-oriented supply-side reforms. |
| Keywords: | pension system reform, social security contribution, macroeconomic modelling, GDP growth |
| JEL: | E27 E63 H55 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:343583 |