nep-pub New Economics Papers
on Public Finance
Issue of 2020‒12‒21
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Designing, not Checking, for Policy Robustness: An Example with Optimal Taxation By Benjamin Lockwood; Afras Y. Sial; Matthew C. Weinzierl
  2. Intergovernmental Transfers and Own Revenues of Subnational Governments in Nigeria By Taiwo, Kayode
  3. How effective are automatic fiscal stabilisers in the OECD countries? By Alessandro Maravalle; Łukasz Rawdanowicz
  4. Can Nudges Increase Take-up of the EITC?: Evidence from Multiple Field Experiments By Elizabeth Linos; Allen Prohofsky; Aparna Ramesh; Jesse Rothstein; Matt Unrath
  5. Options for Reducing the Deficit: 2021 to 2030 By Congressional Budget Office
  6. Wasted in waste? The benefits of switching from taxes to Pay-as-you-throw fees: the Italian case By Giovanna Messina; Antonella Tomasi
  7. Chile; Technical Assistance Report—Assessment of Tax Expenditures and Corrective Taxes By International Monetary Fund

  1. By: Benjamin Lockwood; Afras Y. Sial; Matthew C. Weinzierl
    Abstract: Economists typically check the robustness of their results by comparing them across plausible ranges of parameter values and model structures. A preferable approach to robustness—for the purposes of policymaking and evaluation—is to design policy that takes these ranges into account. We modify the standard optimal income tax model to include the policymaker’s subjective uncertainty over parameter values, and we characterize robust optimal policy as that which maximizes expected social welfare. After calibrating uncertainty over the elasticity of taxable income from past empirical work and novel survey data on economists’ beliefs, we compare the implied robust optimal marginal tax rates to the alternative benchmark policy based on the best point estimates of relevant parameters. Our results suggest that robust optimal marginal tax rates are typically more progressive than in benchmark analyses, raising top marginal tax rates by between 5 and 7 percentage points, and generating modest expected welfare gains.
    JEL: H21 H24
    Date: 2020–11
  2. By: Taiwo, Kayode
    Abstract: The paper explores the effect of the unconditional intergovernmental transfers on own revenues of subnational governments in Nigeria. Models of intergovernmental transfers predict that transfers from the central government to subnational governments amount to a tax reduction on the residents of subnational jurisdictions as transfers lead to a lower effort in own revenue mobilisation by subnational governments. This study employs the instrumental variables (IV) model to establish the impact of annual variation in intergovernmental transfers on own revenues of subnational governments. The study reveals that states depend mainly on transfers from the federal government to run their operations; and, transfers to second-level administrative units, states in Nigeria crowd out own revenues. A 1 percent rise in transfer leads to about 0.64 percent reduction in own revenues per capita. Also, the drive for the collection of revenues nosedives during the election years. The findings are anchored on the political economy of decentralisation in Nigeria.
    Keywords: Federalism, Intergovernmental transfer, revenue, subnational government, instrumental variables
    JEL: H29 H71 H77
    Date: 2020–09–23
  3. By: Alessandro Maravalle; Łukasz Rawdanowicz
    Abstract: This paper proposes an approach to assess the extent of automatic fiscal stabilisation of aggregate household disposable income after a specific shock. The approach is based on the national account identity of household disposable income and elements of the OECD methodology to cyclically adjust budget balances. In a stylised scenario assuming a decline in household market income, automatic stabilisers in 23 OECD countries are found to offset on average around 60% of the shock on impact. Direct taxes provide larger stabilisation than social benefits and social security contributions. There are important differences in the effectiveness of automatic stabilisers across the OECD countries. They mainly reflect non-linear interactions among the size of a specific automatic stabiliser, the elasticity of the automatic stabiliser with respect to a relevant economic variable and the specific shock scenario analysed.
    Keywords: automatic fiscal stabilisers, cyclical adjustment of government budget balances, fiscal policy, household disposable income
    JEL: H31 H6 E63 E32
    Date: 2020–12–15
  4. By: Elizabeth Linos; Allen Prohofsky; Aparna Ramesh; Jesse Rothstein; Matt Unrath
    Abstract: The Earned Income Tax Credit (EITC) distributes more than $60 billion to over 20 million low-income families annually. Nevertheless, an estimated one-fifth of eligible households do not claim it. We ran six pre-registered, large-scale field experiments to test whether “nudges” could increase EITC take-up (N=1million). Despite varying the content, design, messenger, and mode of our messages, we find no evidence that they affected households’ likelihood of filing a tax return or claiming the credit. We conclude that even the most behaviorally informed low-touch outreach efforts cannot overcome the barriers faced by low-income households who do not file returns.
    JEL: D91 H24 H26 I38
    Date: 2020–11
  5. By: Congressional Budget Office
    Abstract: The Congress faces an array of policy choices as it confronts a daunting budgetary situation. To help inform lawmakers as they address budgetary challenges, CBO periodically issues a compendium of policy options and their effects on the federal budget. This document provides estimates of the budgetary savings from 83 options that would decrease federal spending or increase federal revenues over the next decade.
    JEL: H20 H60 H61 H62 H63
    Date: 2020–12–09
  6. By: Giovanna Messina (Bank of Italy); Antonella Tomasi (Bank of Italy)
    Abstract: Solid waste management is one of the most important functions performed by Italian municipalities and is mostly financed through local property taxes. Alternative financing schemes, known as ‘pay-as-you throw’ (PAYT), are designed to price each additional unit of waste and are becoming increasingly frequent at international level. Their advantages in terms of efficiency and equity, as well as of care for the environment, have been investigated both theoretically and empirically. This paper estimates the impact of PAYT schemes on the amount of waste produced and on the costs of its disposal for Italian municipalities. Results show that PAYT schemes deeply affect user behavior: total waste decreases (unsorted waste almost halves). Overall, the costs incurred by municipalities adopting PAYT fall by roughly 10 to 20 per cent in per capita terms, reflecting a reduction of one third in the cost of managing undifferentiated waste.
    Keywords: pay-as-you-throw, municipal solid waste management, policy evaluation
    JEL: D78 H23 H71 Q53
    Date: 2020–11
  7. By: International Monetary Fund
    Abstract: In response to a request from Mr. Ignacio Briones Rojas, Minister of Finance of Chile, a remote mission was conducted by a joint team of staff from the International Monetary Fund (IMF) and the secretariat of the Organisation for Economic Co-operation and Development (OECD) during April – October 2020. The mission’s main purpose was to assist the Minister of Finance with technical support to review Chile’s tax expenditure methodology and its corrective excise taxes. The present report reflects the findings of the mission. This report was written jointly by the IMF and the OECD, with the IMF team leading the work assessing tax expenditures in the corporate income tax (CIT) and the analysis of excises, and the OECD team leading the work assessing tax expenditures in the personal income tax (PIT) and value added tax (VAT). A presentation of the main findings was given to the Minister of Finance on October 6, 2020. The report incorporates comments provided by the Ministry and the Chilean Revenue Administration.
    Keywords: Income;Personal income;Corporate income tax;Personal income tax;Value-added tax;ISCR,CR,excise tax,capital gain,taxable income,carbon tax,tax treatment,Te report
    Date: 2020–11–19

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