nep-pub New Economics Papers
on Public Finance
Issue of 2020‒01‒27
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Media Bias and Tax Compliance: Experimental Evidence By Miloš Fišar; Tommaso Reggiani; Fabio Sabatini; Jiří Špalek
  2. Who Pays for and Who Benefits from Minimum Wage Increases? Evidence from Israeli Tax Data on Business Owners and Workers By Lev Drucker; Katya Mazirov; David Neumark
  3. Is the tax system neutral in India: An analysis of tax treatment of select funds. By Tandon, Suranjali

  1. By: Miloš Fišar (Vienna University of Economics and Business & Masaryk University); Tommaso Reggiani (Cardiff University, Masaryk University & IZA); Fabio Sabatini (Sapienza University of Rome & IZA); Jiří Špalek (Masaryk University)
    Abstract: We study the impact of media bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are significantly more compliant than the control group. The exposure to negative news, instead, does not prompt any significant reaction in respect to the neutral condition, suggesting that participants perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news act as a constant source of psychological priming and play a vital role in taxpayers' compliance decisions.
    Keywords: Tax compliance, media bias, taxation game, laboratory experiment.
    JEL: C91 D70 H26 H31
    Date: 2020–01–23
  2. By: Lev Drucker; Katya Mazirov; David Neumark
    Abstract: A key goal of a higher minimum wage is income redistribution towards low-income families. Existing research on the minimum wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher minimum wage. Higher minimum wages will do more to redistribute income if the owners of businesses who pay the higher minimum are at the top of the income distribution, and conversely if minimum wage employers hare relatively low incomes, the redistributional effects are weakened. We study evidence on this question using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large minimum wage increase. We find that the minimum wage hike reduced profits of companies, with minimum-wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively, and profits declining more for lower-income business owners. Moreover, owners of businesses with higher shares of minimum-wage workers ranked at the bottom of the income distribution of business owners, and their incomes were comparable to those of mid-to-high level workers. In most cases, spouses of business owners earn less than the owners while spouses of minimum-wage workers earn more, further reducing the redistributive effect of the minimum wage increase.
    JEL: H22 H23 J23 J38
    Date: 2019–12
  3. By: Tandon, Suranjali (National Institute of Public Finance and Policy)
    Abstract: One of the fundamental principles of taxation is neutrality. In finance this assumes significance since decision to invest must not depend on tax. It is also true that any departure from neutrality must be grounded in sound economic purpose. Neutrality is desirable for well-functioning financial markets. Investment funds1 form an integral part of financial markets.These can operate through different structures and invest in different asset classes. Some of these funds can channel resources to sectors that are considered key for growth and development. Selecting AIF, REIT, InviTs and Securitisation trusts in India the tax system is compared for these and evaluated. It is found that the existing structure is not neutral and paper presents scope for policy change.
    Date: 2020–01

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