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on Public Finance |
| By: | Florian Scheuer; Joel Slemrod |
| Abstract: | This paper evaluates proposals for an annual wealth tax. While a dozen OECD countries levied wealth taxes in the recent past, now only three retain them, with only Switzerland raising a comparable fraction of revenue as recent proposals for a US wealth tax. Studies of these taxes sometimes, but not always, find a substantial behavioral response, including of saving, portfolio change, avoidance, and evasion, and the impact depends crucially on design features, especially the broadness of the base and enforcement provisions. Because the US proposals are very different from any previous wealth tax, experience in other countries offers only broad lessons, but we can gain insights from closely related taxes, such as the property and the estate tax, and from optimal tax analysis of the role of wealth taxation. |
| JEL: | H2 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28150&r=all |
| By: | Jonas Loebbing |
| Abstract: | What are the implications of (endogenous) directed technical change for the design of redistributive income taxes? I study this question in a Mirrleesian economy augmented to include endogenous technology development and adoption choices by firms. Under certain conditions, any progressive tax reform induces technical change that compresses the pre-tax wage distribution. The key intuition is that progressive tax reforms tend to increase labor supply of less skilled relative to more skilled workers, which induces firms to develop and use technologies that are more complementary to the less skilled. These directed technical change effects make the optimal tax scheme more progressive, raising marginal tax rates at the right tail of the income distribution and lowering them at the left tail. For reasonable calibrations, the impact of directed technical change on the optimal tax is quantitatively important: optimal marginal tax rates are reduced substantially for incomes below the median and increase monotonically over the bulk of the income distribution instead of being U-shaped (as in most of the previous literature). |
| Keywords: | optimal taxation, directed technical change, endogenous technical change, wage inequality |
| JEL: | H21 H23 H24 J31 O33 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8743&r=all |
| By: | David Hanrahan (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | The tax challenges of digitalization have been to the forefront of national and international discussions on public revenues in recent years. The digital transformation is seen as being an exacerbating factor in the erosion of tax bases and the shifting of profits to low tax jurisdictions, particularly by multinational companies, thus reducing tax revenues for governments. While there is a large literature examining the role of ICT and digitalization in raising economic growth, productivity and other macroeconomic variables, the relationship between digitalization and tax revenues has been relatively understudied - despite being one of key drivers of what could be most significant change to international tax rules in a century. This study utilizes panel data covering OECD countries during the period from 1995 to 2018, and examines the effect of the rise of digitalization on tax revenues employing both static and dynamic panel data analysis techniques. The findings indicate that digitalization may have a negative impact on the ability of a country with high digital dynamics to generate higher tax returns. |
| Keywords: | Digitalization, taxation, tax revenues, ICT, OECD countries |
| JEL: | H20 H25 L81 L86 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei285&r=all |
| By: | Bas Jacobs (Erasmus University Rotterdam); Uwe Thuemmel (University of Zurich) |
| Abstract: | This paper studies how linear tax and education policy should optimally respond to skill-biased technical change (SBTC). SBTC affects optimal taxes and subsidies by changing i) direct distributional benefits, ii) indirect redistributional effects due to wage-(de)compression, and iii) education distortions. Analytically, the effect of SBTC on these three components is shown to be ambiguous. Simulations for the US economy demonstrate that SBTC makes the tax system more progressive, since SBTC raises the direct distributional benefits of income taxes, which more than offset their larger indirect distributional losses, and it increases education distortions. Also, SBTC lowers optimal education subsidies, since SBTC generates larger direct distributional losses of education subsidies, which more than offset their larger indirect distributional gains, and it exacerbates education distortions. |
| Keywords: | Human capital, General equilibrium, Optimal taxation, Education subsidies, Technological change |
| JEL: | O3 H2 H5 I2 J2 |
| Date: | 2020–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200085&r=all |
| By: | Matthias Krapf; David Staubli |
| Abstract: | We estimate the corporate elasticity of taxable income. Our analysis draws on panel variation in the decentralized system of corporate taxation in Switzerland. We find that an increase in a jurisdiction's corporate net-of-tax rate by 1% results in an increase in aggregate corporate income by about 3.5% over a time span of 4 years. The elasticity is larger in remote, non-central locations. Firm entry, exit, and mobility only account for a small share of the overall elasticity. |
| Keywords: | corporate income tax, tax elasticity, fiscal federalism |
| JEL: | H21 H25 H32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8715&r=all |
| By: | Peter Nannestad (Aarhus University) |
| Abstract: | Denmark has a two-tier tax system. The 98 Danish municipalities have formal authority to levy taxes on income and on land and to set their own (proportional) tax rates. However, since the 1980s central government has increasingly tried to gain influence on the municipalities’ tax-setting behaviour, primarily through yearly agreements with the municipalities’ interest organization. Thus, one might question if in fact Danish municipalities have any leeway any longer when it comes to fixing or changing tax rates. I try to contribute to that debate by examining if Danish municipalities can be shown to engage in strategic tax-setting, i.e. if tax-setting in Danish municipalities is systematically influenced by the tax-setting behaviour of relevant other municipalities. I assume that as a defence against the twin threats of “voice” and “exit” rational politicians will engage in strategic tax-setting whenever they can. Thus, if I do not find evidence of strategic tax-setting, this finding supports the view that Danish municipalities do not have any leeway any longer to determine their own tax rates. On the other hand, to the extent municipalities can be shown to engage in strategic tax-setting, they must have at least some leeway to do so, and their tax-setting behaviour cannot be totally determined by central government. I analyse tax-setting behaviour with respect to the income tax rate, the land tax rate, and a synthetic measure of the municipal tax pressure. The analysis is based on a balanced panel of 98 municipalities over the period 2007-2017. With “relevant other municipalities” defined according to a neighbourhood (common border) criterion and using a SDM specification, I find a statistically significant impact on all three tax rates in a given municipality from the corresponding mean tax rates in its neighbours, although in substantial terms the effect is rather small when it comes to the land tax rate. Furthermore, these effects cannot be ascribed to spatially correlated shocks in included or omitted exogenous variables. I conclude that Danish municipalities must still have some autonomy when it comes to decentralized tax-setting. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cccrwp:2019-10-ccr&r=all |
| By: | Goodness C. Aye; Laurence Harris; Junior T. Chiweza |
| Abstract: | This paper examines the relationship between monetary policy and wealth inequality in South Africa. We employed a unique database of tax administrative data which allowed us to account for individual heterogeneity. These tax data span from 2011 to 2017 and include over 3 million individual taxpayers in South Africa after data cleaning. Results based on fixed- and random-effects panel model estimates show that monetary policy generally increases wealth Gini inequality while it decreases the wealth 90-10 percentile differential. |
| Keywords: | Monetary policy, wealth inequality, distribution, Tax data, heterogeneity |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-174&r=all |
| By: | Maya GOLDMAN; Ingrid WOOLARD; Jon JELLEMA |
| Abstract: | This paper applies the Commitment to Equity (CEQ) Assessment Framework to the 2014/15 Living Conditions Survey for South Africa to analyse the progressivity of the main tax and social spending programs and quantify their impact on poverty and inequality. The tax and social spending system is progressive - the burden of taxes falls on the richest in South Africa and social spending results in sizable increases in the incomes of the poor. Reductions in poverty and inequality are the largest achieved in the emerging market countries that have so far been included in the CEQ. |
| Keywords: | Afrique du Sud |
| JEL: | Q |
| Date: | 2020–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:avg:wpaper:en11943&r=all |