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on Public Economics |
| By: | Baker, Scott; Janas, Pawel; Kueng, Lorenz |
| Abstract: | Empirical research in public economics, including our own, often uses variation in state and local taxes as an empirical laboratory to estimate causal relationships. A key concern is that other taxes might change at the same time. To assess this concern, we develop a dataset of state (1977-2022) and local (2000-2022) tax rates and revenue from personal income, corporate income, property, sales, and excise taxes. This new dataset generates two key results. First, we find that taxes of different types tend to co-move within a jurisdiction: a tax change of one type can more than double the likelihood of a second tax type changing in the same year. Local tax changes also co-move with tax changes enacted by the state they are located in. This positive correlation can upwardly bias elasticity estimates, but only moderately. For example, regressing state economic outcomes on the full set of state tax changes yields elasticities that are about 10-30% smaller than those obtained from using a single tax type in isolation. Second, we document that the mix of taxes across state and local jurisdictions is very different, and that these differences have become more pronounced over time as jurisdictions have increasingly become reliant on the single tax type - sales, personal or corporate income tax - that was most prominent for them in the earliest part of our sample. |
| JEL: | H20 H71 H72 H77 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19312 |
| By: | Paradisi, Matteo; Sartori, Elia |
| Abstract: | We study tax audit policies when the Tax Authority predicts true income using an inference model. When taxpayers are aware of model-based audit rules, using an inference model shapes both declaration incentives and the targeting of tax audits. The Tax Authority can achieve arbitrarily high tax collection rates if the model’s precision is sufficiently high. However, the targeting of audits yields minimal revenues as optimal reliance on the model focuses on enhancing the incentives to declare income in the first place. Prediction power is used to shape incentives rather than to direct audits. At the optimum, the predictions from the statistical model are used to screen larger true income taxpayers, tolerating evasion from taxpayers with lower incomes and high propensity to evade. We corroborate and extend our theoretical findings with numerical simulations calibrated on aggregate moments from administrative audit data. Enhanced model precision reduces tax evasion, particularly among higher incomes, thereby alleviating the inequality in effective tax rates induced by optimal enforcement. While plausible enhancements in model precision yield modest revenue gains, these gains are substantial compared to the audit budget increase required to achieve similar tax revenues without an inference model. |
| Keywords: | Tax evasion; Tax enforcement; Tax audits |
| JEL: | H21 H26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19213 |
| By: | Lee, Gyuchan |
| Abstract: | This paper examines how consumers respond to different forms of soda tax information under tax-inclusive pricing. Using a randomized pre–post discrete choice experiment (DCE) in China, we isolate informational effects while holding tax-inclusive prices constant. Difference-in-differences comparisons and mixed logit estimates show that informing consumers that the displayed soda price includes a soda tax reduces regular soda demand relative to a price-only control group, while explicit disclosure of the tax amount produces larger demand reductions and higher implied price elasticity. The estimates suggest that tax information primarily reduces the perceived attractiveness of regular soda, whereas explicit tax disclosure increases price sensitivity. These findings suggest that tax-inclusive pricing alone may not ensure full tax salience and that disclosure design may complement corrective taxation beyond the standard price effect. |
| Keywords: | Food Consumption/Nutrition/Food Safety |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404547 |
| By: | Michael Barczay; Shafik Hebous; Tom Zimmermann |
| Abstract: | This paper studies heterogeneity in the pass-through of Germany's temporary VAT reduction in July 2020. Using confidential product-level CPI data, we document substantial dispersion in consumer-price responses: nearly half of standard-rate products show no consumer-price change, while 30 percent exhibit full pass-through. Lower-income households experienced somewhat larger proportional price declines than higher-income households. Using an inverse-optimality consistency test, we show that, once the full revenue loss is considered, the reform cannot be rationalized by any progressive weighting of gains across income groups. |
| Keywords: | VAT, tax incidence, fiscal stimulus, pass-through |
| JEL: | H21 H22 H23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12922 |
| By: | Michael Graber; Morten Håvarstein; Magne Mogstad; Gaute Torsvik; Ola L. Vestad (Statistics Norway) |
| Abstract: | The elasticity of taxable income (ETI) parameter is a key quantity in empirical analysis of tax policy and labor supply. We examine when a commonly applied class of ETI estimands can be used to learn about individuals’ ETI parameters and their (un)compensated elasticities of labor supply. We begin by providing necessary and sufficient conditions for these estimands to be given a causal interpretation as a positively weighted average of heterogeneous ETI parameters. We then apply these results to empirically analyze a reform of the Norwegian tax system that reduced the marginal tax rates on middle and high incomes. The estimated ETI parameters increase steadily with income, meaning high income individuals are more responsive to tax changes than middle-income individuals. Next, we show how (un)compensated elasticities of labor supply can be bounded directly from the ETI estimands, or point identified by combining these estimands with estimates of earnings responses to lottery winnings. The results suggest an (un)compensated elasticity of 0.1 (0.0) for middle-income individuals. The (un)compensated elasticity estimates increase steadily with income to around 0.45 (0.3) for high-income individuals. These findings imply a substantial excess burden of taxation, and that reducing top-income tax rates would increase tax revenue. Our findings are also informative about how the intertemporal elasticity of substitution and the Frisch elasticity vary across the income distribution. |
| Keywords: | C20; D15; H20; J22 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1037 |
| By: | Devereux, Michael; Lockwood, Ben; Yerushalmi, Erez |
| 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, |
| Keywords: | R&D tax credits; patent boxes; corporate income tax; innovation policy; R&D spillovers; tax incentives |
| Date: | 2026–08–17 |
| URL: | https://d.repec.org/n?u=RePEc:akf:cafewp:43 |
| By: | Güçeri, Irem; Hou, Xipei; Xing, Jing |
| Abstract: | We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds. |
| Keywords: | Venture capital; Tax incentives |
| JEL: | G24 G32 H25 L26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19199 |
| By: | Michael A. Clemens |
| Abstract: | Governments traditionally use quotas to limit immigration, but the US government has recently proposed taxes on immigration, focused on high-skill foreign workers. The effects of a high-skill immigration tax hinge on price elasticities of demand and supply that the literature has rarely measured. I estimate key response elasticities to evaluate the effects of a $100, 000 tax on Optional Practical Training (OPT) work permits, the largest single channel through which high-skill immigrants enter the US economy. Depending on the incidence of the tax, evaluation requires estimating the price elasticity of demand for US university degrees with the OPT option, the price elasticity of the supply of OPT placements by universities, or the price elasticity of US employers' demand for OPT workers. In all incidence scenarios OPT starts for a given level of international enrollment fall by roughly a fifth or more, and by as much as four fifths under university incidence. The resulting decline in OPT opportunities would reduce international student enrollment at universities, costing them hundreds of millions to over four billion dollars a year in net margin. I illustrate the need for further research on the relevant response elasticities by showing that plausible parameters yield a zero or even negative net fiscal impact of an expanded $100, 000 tax on H-1B workers. The need for better models and estimates will grow with the prevalence of immigration taxes. |
| Keywords: | Optional Practical Training, H-1B, immigration, immigrant, labor, tax, fee, payment, duty, tariff, skill, talent, foreign, student, graduate, college, higher ed, university, demand, supply, elasticity, STEM |
| JEL: | F22 H22 I23 J61 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26217 |
| By: | Moustafa Chatzouz |
| Abstract: | Public debt and wealth concentration have co-moved persistently across advanced economies and historical periods, defying standard theories of wealth inequality, particularly given that rising inequality has coincided with falling real interest rates in recent decades. I develop a stylized Diamond model with household heterogeneity and progressive taxation to formalize how public debt, through its tax burden, endogenously dictates tax progressivity and thereby affects the wealth distribution. In this framework, permanent debt shocks alter tax progressivity depending on the macroeconomic regime, with debt expansions increasing progressivity when interest rates are high but reducing it when interest rates are low. The resulting impact of public debt on wealth inequality is nonlinear in the overall level of the tax burden, disequalizing below a threshold and equalizing above it. Cross-country empirical evidence supports these predictions and shows that public debt is a quantitatively important, and often dominant, driver of postwar wealth inequality, with sizable effects transmitted primarily through the tax burden. These findings establish the distribution of the tax burden as a primary driver of long-run wealth inequality, and public debt as a central mediating channel through which structural shocks, such as population aging or artificial intelligence, propagate to the wealth distribution. |
| Keywords: | Tax Progressivity; Fiscal Policy; Wealth Inequality; Redistribution; Public Debt; Neoclassical Growth Model |
| Date: | 2026–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/171 |
| By: | Coven, Joshua; Golder, Sebastian; Gupta, Arpit; Ndiaye, Abdoulaye |
| Abstract: | Low property taxes amplify lock-in effects for elderly homeowners, limiting housing access for young families. Higher property taxes function as “embedded leverage, †reducing required down payments through a capitalization effect and enabling greater homeownership among younger households. Our overlapping generations model shows that raising California’s property taxes to Texas levels would increase homeownership by six percentage points and young household ownership by eight percentage points. Conversely, higher capital gains taxes worsen lock-in effects and reduce young homeownership. Asset taxes can effectively reallocate housing to higher-valuation households when financial constraints exist, providing an independent justification for property taxation policies. |
| Keywords: | housing affordability; Housing inequality; Property taxes |
| JEL: | H71 R21 H24 J11 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19230 |
| By: | Christl, Michael; Köppl-Turyna, Monika |
| Abstract: | This paper examines whether the design of a country's tax system matters for economic growth using the Tax Foundation's International Tax Competitiveness Index (ITCI), a composite of more than 40 legislated tax-policy variables spanning corporate, individual income, consumption, property, and cross-border tax rules. Exploiting within-country variation across 23 European economies over 2014-2024, we estimate two-way fixed-effects panel regressions and dynamic distributed-lag specifications. Three findings emerge. First, improvements in aggregate tax competitiveness are positively and significantly associated with real GDP per capita growth, robust to a wide range of controls. Second, this aggregate effect is driven entirely by the corporate tax pillar; no other component displays a significant growth effect. Third, the corporate tax effect materializes contemporaneously and accumulates over time, with a statistically significant three-year cumulative effect of approximately 0.16 percentage points per one-point improvement in the corporate tax score. These results suggest that the full architecture of the corporate tax system-not merely the headline statutory rate-is what matters for growth. |
| Abstract: | Die laufenden Budgetverhandlungen stellen die österreichische Bundesregierung vor eine doppelte Herausforderung. Die öffentlichen Finanzen müssen nachhaltig konsolidiert werden, zugleich dürfen Investitionen, Innovation und Wachstum am Standort nicht gebremst werden. Ein neues Research Paper von EcoAustria zeigt, dass die Ausgestaltung des Steuersystems dabei eine zentrale Rolle spielt - insbesondere im Bereich der Unternehmensbesteuerung. Die Analyse von Monika Köppl-Turyna und Michael Christl untersucht den Zusammenhang zwischen Steuerwettbewerbsfähigkeit und Wirtschaftswachstum in 23 europäischen und vergleichbaren OECD-Staaten im Zeitraum 2014 bis 2024. Als Maßstab dient der "International Tax Competitiveness Index" der Tax Foundation, der mehr als 40 steuerpolitische Variablen berücksichtigt - darunter Unternehmenssteuern, Einkommensteuern, Konsumsteuern, vermögensbezogene Steuern sowie grenzüberschreitende Steuerregeln. Die Ergebnisse zeigen, dass Verbesserungen der steuerlichen Wettbewerbsfähigkeit in einem positiven Zusammenhang mit dem realen Wachstum des BIP pro Kopf stehen. Getrieben wird dieser Effekt jedoch nahezu ausschließlich durch die Unternehmensbesteuerung. Andere Bereiche des Steuersystems - etwa Einkommen-, Konsum- oder vermögensbezogene Steuern - zeigen in der Analyse keinen vergleichbar robusten Wachstumseffekt. Entscheidend ist dabei nicht allein der Körperschaftsteuersatz. Wachstumsrelevant sind vielmehr auch Abschreibungsregeln, Verlustverrechnung, die steuerliche Behandlung von Forschung und Entwicklung, die Komplexität des Steuersystems sowie die steuerliche Behandlung von Eigen- und Fremdkapital. Ein wettbewerbsfähiges Unternehmenssteuersystem senkt Investitionshemmnisse, verbessert die Kapitalallokation und stärkt die Innovationsfähigkeit von Unternehmen. Vor dem Hintergrund der Budgetverhandlungen ergibt sich daraus eine klare Schlussfolgerung: Konsolidierungsmaßnahmen sollten so ausgestaltet werden, dass sie die steuerlichen Rahmenbedingungen für Investitionen nicht verschlechtern. Höhere Belastungen oder zusätzliche Komplexität können zwar kurzfristig Einnahmen bringen, mittel- bis langfristig aber Wachstum, Investitionen und damit auch die künftige Steuerbasis schwächen. Nachhaltige Budgetpolitik sollte daher Ausgabendisziplin und Strukturreformen mit einem Steuersystem verbinden, das Investitionen, Innovation und Wachstum ermöglicht statt erschwert. |
| Keywords: | tax competitiveness, corporate taxation, economic growth, growth regressions |
| JEL: | H20 H25 O40 O43 E62 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ecoarp:342492 |
| By: | Katy Bergstrom; William Dodds; Juan Rios |
| Abstract: | This paper develops a general framework to construct optimal policy reforms allowing for fiscal spillovers onto other policymakers. The optimal reform direction depends on a single sufficient statistic for each policy, the welfare per internal cost (WPIC), which measures the welfare gain per dollar spent by the policymaker accounting for the welfare impacts of fiscal spillovers onto other policymakers. The WPIC collapses to the (welfare-weighted) marginal-value-of-public-funds if there are no fiscal spillovers and to the (welfare-weighted) net-social-benefit-per-dollar if behavioral costs accrue externally. We provide numerical examples illustrating that fiscal spillovers can meaningfully change the optimal reform direction. |
| Keywords: | optimal reforms, fiscal spillovers, welfare per internal cost, marginal value of public funds, net social benefit, sufficient statistics |
| JEL: | H20 H30 H50 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12883 |
| By: | Justin E. Holz; Ricardo Perez-Truglia; Andrew Simon; Alejandro Zentner |
| Abstract: | Navigating the tax system often requires information and judgment that taxpayers may lack. Although taxpayers sometimes rely on human experts, AI could provide comparable assistance at substantially lower cost. Yet there is no causal evidence on how taxpayers use AI tax agents or how these tools affect their behavior. We fill this gap with a field experiment in the context of property tax appeals. We recruited a sample of 645 households in Dallas County, Texas. All households received access to a website providing personalized information, filing instructions, and supporting evidence for an appeal. Half were randomly assigned to a version of the website that also included an AI chatbot capable of answering questions and providing guidance tailored to their circumstances. Chatbot take-up was high: 78% initiated a conversation. Access to the chatbot increased the probability of filing an appeal without a human agent by 9.1 pp, from 41.4% to 50.5%. Evidence from clickstream data and conversation transcripts suggests that the chatbot helped households exercise judgment—that is, evaluate and act on the available information. The increase in appeal filing was smaller among less-advantaged households, providing suggestive evidence that the chatbot widened existing disparities. Our results demonstrate the potential of AI tax assistance while highlighting that who benefits depends not only on access, but also on how taxpayers use the technology. |
| JEL: | C93 H71 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35632 |