nep-pub New Economics Papers
on Public Finance
Issue of 2015‒08‒01
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Taxation of Superstars By Florian Scheuer; Iván Werning
  2. Cigarette Tax Pass-Through by Product Characteristics: Evidence from Nielsen ScanTrack Data By Wang, Xiaojin; Zheng, Yuqing; Reed, Michael; Zhen, Chen

  1. By: Florian Scheuer; Iván Werning
    Abstract: How are optimal taxes affected by the presence of superstar phenomena at the top of the earnings distribution? To answer this question, we extend the Mirrlees model to incorporate an assignment problem in the labor market that generates superstar effects. Perhaps surprisingly, rather than providing a rationale for higher taxes, we show that superstar effects provides a force for lower marginal taxes, conditional on the observed distribution of earnings. Superstar effects make the earnings schedule convex, which increases the responsiveness of individual earnings to tax changes. We show that various common elasticity measures are not sufficient statistics and must be adjusted upwards in optimal tax formulas. Finally, we study a comparative static that does not keep the observed earnings distribution fixed: when superstar technologies are introduced, inequality increases but we obtain a neutrality result, finding tax rates at the top unaltered.
    JEL: H21 H24
    Date: 2015–07
  2. By: Wang, Xiaojin; Zheng, Yuqing; Reed, Michael; Zhen, Chen
    Abstract: We use market-level scanner data collected from U.S. convenience stores in 2011 and 2012 to examine who bears the economic burden of cigarette taxes. We find cigarette taxes are fully passed through to consumer prices, suggesting consumers pay all the excess burden of these taxes. Tax incidence differs by class of cigarette; pass-through rates for premium packs and cartons are higher than those for discount packs and cartons, indicating possibilities of substitution in consumptions across tiers and brands.
    Keywords: cigarette, excise tax, tax pass-through, tax avoidance., Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Health Economics and Policy, D1, H2, H7, L6,
    Date: 2015

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