nep-pub New Economics Papers
on Public Finance
Issue of 2019‒11‒11
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Politics of Flat Taxes By Carroll, Daniel R.; Dolmas, James; Young, Eric R.
  2. The mobile tax bill: how mobile is impacted by sector-specific taxes By Castells, Pau; Pedrós, Xavier; Sivakumaran, Mayuran
  3. Taxation and the External Wealth of Nations : Evidence from Bilateral Portfolio Holdings By Huizinga, Harry; Todtenhaupt, Maximilian; Voget, Johannes; Wagner, W.B.
  4. Inattention and the Taxation Bias By Jérémy BOCCANFUSO; Antoine FEREY
  5. Optimal social security claiming behavior under lump sum incentives: Theory and evidence By Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana
  6. Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage By Peter Kjær Kruse-Andersen; Peter Birch Sørensen
  7. Employment Effects of Income Tax Reforms: Lessons from Slovakia By Michal Horvath; Zuzana Siebertova

  1. By: Carroll, Daniel R. (Federal Reserve Bank of Cleveland); Dolmas, James (Federal Reserve Bank of Dallas); Young, Eric R. (Federal Reserve Bank of Cleveland)
    Abstract: We study the political determination of flat tax systems using a workhorse macroeconomic model of inequality. There is significant variation in preferred tax policy across the wealth and income distribution. The majority voting outcome features (i) zero labor income taxation, (ii) simultaneous use of capital income and consumption taxation, and (iii) essentially zero transfers. This policy is supported by a coalition of low- and middle-wealth households. Zero labor income taxation is supported by households with below average wealth, while the middle-wealth households prefer to keep the transfer (and thus other tax rates) low. We also show that the outcome is sensitive to assumptions about the voting power of household groups, the degree of wealth and income mobility, and the forward-looking nature of votes.
    Keywords: Political Economy; Essential Set; Voting; Inequality; Incomplete Markets;
    JEL: D52 D72 E62
    Date: 2019–09–25
  2. By: Castells, Pau; Pedrós, Xavier; Sivakumaran, Mayuran
    Abstract: Many developing countries have introduced sector-specific taxes on the consumption of mobile services, which apply on top of general taxes, and therefore discourage the positive externalities that have been estimated to be associated with the use of mobile technology on workers' productivity and consumer welfare. This paper investigates the first order impact of these taxes on consumer prices. Firstly, we develop a measure of prices of mobile services and devices, and create a framework to calculate prices before and after tax, taking into account both general and sector-specific taxes, for more than 100 markets worldwide. We use this to provide country and regional benchmarks and to run preliminary bivariate analyses on how taxes impact prices; and how both of these relate to mobile connectivity outcomes. This provides updated analysis, as of 2017 - making a contribution to previous studies (e.g., ITU 2013). Secondly, we provide the results of a tracker of sector-specific tax changes, from 2011 to 2018, for over 100 markets - providing insights on how fiscal policies have changed in their treatment of mobile services and devices in latest years.
    JEL: L96 H20
    Date: 2019
  3. By: Huizinga, Harry (Tilburg University, Center For Economic Research); Todtenhaupt, Maximilian; Voget, Johannes (Tilburg University, Center For Economic Research); Wagner, W.B. (Tilburg University, Center For Economic Research)
    Abstract: This paper examines the impact of capital income taxation on the composition of foreign portfolio investment. Studying bilateral portfolio positions among a sample of 37 countries over the period 2001-2015, we find that capital gains and dividend taxation reduce the share of equities in foreign investments, while interest taxation increases this share. The results suggest that domestic capital income taxation affects the worldwide asset allocation of domestic investors. The estimated tax sensitivities imply a significant increase in country’s external wealth following a tax policy change that stimulates investors to hold higher-yielding equity investments.
    Keywords: Asset allocation; capital income taxation; foreign portfolio investment
    JEL: G11 H24
    Date: 2019
  4. By: Jérémy BOCCANFUSO (Paris School of Economics; EHESS.); Antoine FEREY (CREST; Ecole Polytechnique.)
    Abstract: This paper studies how information frictions in agents’ tax perceptions affect the design of actual tax policy. Developing a positive theory of tax policy, we show that agents’ inattention interacts with policymaking and induces the government to implement inefficiently high tax rates: this is the taxation bias. We quantify the magnitude of this policy distortion for the US economy. Overall, our findings suggest that existing information frictions – and thereby tax complexity – lead to undesirable, large and regressive tax increases.
    Keywords: Optimal taxation; inattention.
    JEL: H21 D90
    Date: 2019–10–01
  5. By: Maurer, Raimond; Mitchell, Olivia S.; Rogalla, Ralph; Schimetschek, Tatjana
    Abstract: Many Americans claim Social Security benefits early, though this leaves them with lower benefits throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict claiming delays if, by delaying benefits, people received a lump sum instead of an annuity. We predict that current early claimers would defer claiming by a year given actuarially fair lump sums, and the predictions conform with respondents' answers to a strategic survey about the lump sum. In other words, such a reform could provide an avenue for encouraging delayed retirement without benefit cuts or tax increases. Moreover, many people would still defer claiming even for smaller lump sums.
    Keywords: retirement,annuity,delayed claiming,pension,early retirement,Social Security
    JEL: G11 G22 H55 J26 J32
    Date: 2019
  6. By: Peter Kjær Kruse-Andersen; Peter Birch Sørensen
    Abstract: We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage occurring via international trade in electricity and via shifts between domestic and foreign production of other goods. The optimal tax-subsidy scheme is based on an intuitive principle: Impose a uniform carbon tax on all additions to global emissions caused by changes in domestic production and consumption of energy, including additions to emissions occurring via shifts in international trade. Emissions from the sector exposed to foreign competition should be taxed at reduced rates to avoid excessive carbon leakage, and a part of the carbon tax on electricity should be levied at the consumer rather than the producer level to ensure taxation of the carbon content of imported electricity. Producers of renewables-based electricity should receive a subsidy to internalize their contribution to the reduction of global emissions. In other sectors emissions should be taxed at a uniform rate corresponding to the marginal social cost of meeting the target for emissions reduction. Simulations calibrated to data for the Danish economy suggest that redesigning energy taxes and subsidies to account for carbon leakage can generate a welfare gain.
    Keywords: optimal unilateral climate policy, carbon leakage, optimal energy taxes and subsidies
    JEL: H21 H23 Q48 Q54
    Date: 2019
  7. By: Michal Horvath (University of York); Zuzana Siebertova (Council for Budget Responsibility)
    Abstract: Fundamental income tax reforms are usually justified by or opposed because of large employment implications. The employment gains and losses are supposed to originate from various behavioural and dynamic effects of tax reforms over the medium to long term. To test the limits of such arguments, we study hypothetical radical measures designed to have potentially large employment effects inthe context of Slovakia. A close inspection of the different implications of such tax reforms for adjustment on the extensive margin of the labour market reveals that promises or worries of large employment effects have little empirical support. This is because labour supply responses to ‘making work pay’ are small, the requirement of revenue neutrality limits the extent to which (dis)incentivising work is feasible, and because income effects arising from positive assortative mating within families counteract total individual-level effects. Our framework suggests the focus of tax reformers should be on the variation in effective labour supply coming from intensive margin effects.
    Keywords: microsimulation, dynamic general equilibrium, employment, labour supply elasticity, tax reform
    JEL: E24 H24 H31 J22
    Date: 2019–11

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