nep-pub New Economics Papers
on Public Finance
Issue of 2020‒03‒23
six papers chosen by

  1. Optimal Taxation and Investment-Specific Technological Change By Nóbrega, Valter
  2. Does the Winner Take It All? Redistributive Policies and Political Extremism By Gianmarco Daniele; Amedeo Piolatto; Willem Sas
  3. The impact of labor income tax progressivity on the fiscal multipliers in the context of fiscal consolidation programs By Santos, Mariana
  4. Federal Road Charge Tax Administration Process By Jenn, Alan; Fleming, Kelly
  5. Cigarette Taxes and Teen Marijuana Use By Anderson, D. Mark; Matsuzawa, Kyutaro; Sabia, Joseph J.
  6. Toward a Comprehensive Tax Reform for Italy By Emile Cammeraat; Ernesto Crivelli

  1. By: Nóbrega, Valter
    Abstract: In this paper, we look at the relationship between Investment Specific Technological Change (ISTC) and optimal level of labor income progressivity. We develop an incomplete markets overlapping generations model that matches relevant features of the US economy and find that the observed drop in the relative price of investment since the 1980's leads optimal progressivity to increase. This result hinges on ISTC increasing the wage premium through an increase in the variance of the permanent component of labor income. This result is supported by recent findings in the literature that highlight the increasing role of the permanent component of labor income in the observed increase in income inequality.
    Keywords: Optimal taxation; Technological Change; Income Inequality
    JEL: E21 H21 J0
    Date: 2020–01–22
  2. By: Gianmarco Daniele; Amedeo Piolatto; Willem Sas
    Abstract: In this paper, we argue that regional heterogeneity of underlying fundamentals -such as economic history, geography or natural resources- can lead to extreme voting in federal systems of government. The outcome of higher-level (federal) policies often depends on these fundamentals, meaning some regions will always benefit from the policy whilst others lose out. In our model, voters have an incentive to stack this kind of redistribution in their favour, using the regional ties of politicians as a strategic link. The median voter therefore elects federal representatives that are extremely protective of their own region's interests. We find that the incentive to select such a tough negotiator survives the pressure to belong to the ruling coalition. We test our predictions by looking at the performance of parties at national and European Parliament elections since 1990. We indeed observe that such strategic voting behaviour is U-shaped on the "losing-winning from the policy" dimension. Our online survey provides further evidence.
    Keywords: strategic delegation, interregional redistribution, political extremism, federalism, bargaining, coalitions, EU elections, euroscepticism, populism
    JEL: H6 H71 H74 H77
    Date: 2020–02
  3. By: Santos, Mariana
    Abstract: Fiscal multipliers depend on several structural characteristics of each economy. In this work project it is argued that labor income tax progressivity lowers fiscal multipliers of fiscal consolidation programs. By calibrating a model with incomplete-markets and overlapping generations for the United States, for different values of the labor income tax progressivity, it is shown that as progressivity increases, the recessionary impacts of fiscal consolidation programs are lower in the case of consolidation through decrease of government spending and are more recessionary in the case of consolidation financed with tax hikes. The first case is explained through the positive relationship between labor tax progressvity and the percentage of borrowing constrained agents in the economy. In the second case the results are linked to the distortionary effects in the economy of increasing tax progressivity.
    Keywords: Fiscal Multipliers; Labor Income Tax Progressivity; Government Spending; Taxation
    JEL: H30
    Date: 2020–01–06
  4. By: Jenn, Alan; Fleming, Kelly
    Abstract: The gasoline tax is one of the primary sources of revenue for transportation infrastructure funding. However, recent revenue shortfalls due to a combination of inflation, fuel efficiency improvements, and vehicle electrification have led to discussions of alternative funding mechanisms such as the road user charge where drivers would pay fees by miles driven rather than gallons consumed. In this report, researchers investigate the institutional structure of the current gasoline tax at the federal level including historical changes, how the tax is collected, and how it is allocated and disbursed to fund infrastructure projects. In outlining the structure of the current gasoline tax, they identify key opportunities for a road user charge to be integrated into the current funding system. These include considerations for tax evasion, simplification of state level allocated disbursement formulas, re-allocation of funds, and designating spending for fuel-specific infrastructure. View the NCST Project Webpage
    Keywords: Law, Social and Behavioral Sciences, Gasoline tax, highway trust fund, transportation infrastructure funding
    Date: 2020–03–01
  5. By: Anderson, D. Mark (Montana State University); Matsuzawa, Kyutaro (San Diego State University); Sabia, Joseph J. (San Diego State University)
    Abstract: The spillover effect of cigarette taxes on youth marijuana use has been the subject of intense public debate. Opponents of cigarette taxes warn that tax hikes will cause youths to substitute toward marijuana. On the other hand, public health experts often claim that because tobacco is a "gateway" drug, higher cigarette taxes will deter youth marijuana use. Using data from the National and State Youth Risk Behavior Surveys (YRBS) for the period 1991-2017, we explore the relationship between state excise taxes on cigarettes and teen marijuana use. In general, our results fail to support either of the above hypotheses. Rather, we find little evidence to suggest that teen marijuana use is sensitive to changes in the state cigarette tax. This null result holds for the sample period where cigarette taxes are observed to have the largest effect on teen cigarette use and across a number of demographic groups in the data. Finally, we find preliminary evidence that the recent adoption of state e-cigarette taxes is associated with a reduction in youth marijuana use.
    Keywords: cigarette taxes, teen marijuana use, e-cigarette taxes, youth risky behavior
    JEL: I12 I18 K42
    Date: 2020–02
  6. By: Emile Cammeraat; Ernesto Crivelli
    Abstract: This paper evaluates elements of a comprehensive reform of the Italian tax system. Reform options are guided by the principles of reducing complexity, broadening the tax base, and lowering marginal tax rates, especially the tax burden on labor income. The revenue and distributional implications of personal income and property tax reforms are assessed with EUROMOD, while a microsimulation model is developed to evaluate VAT reform options. Simulations suggest that a substantial reduction in the tax burden on labor income can be obtained with a revenue-neutral base-broadening reform that streamlines tax expenditures and updates the property valuation system. In addition, a comprehensive reform would benefit low- and middle-income households the most, by lowering significantly their overall current tax liability, which results in increased progressivity of the tax system.
    Date: 2020–02–21

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