nep-pub New Economics Papers
on Public Finance
Issue of 2021‒01‒11
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Distributional Impact of the Pandemic By Hacıoglu Sinem; Diego Känzig; Paolo Surico
  2. Tax Policy Measures to Combat the SARS-CoV-2 Pandemic and Considerations to Improve Tax Compliance: A Behavioral Perspective By James Alm; Kay Blaufus; Martin Fochmann; Erich Kirchler; Peter N. C. Mohr; Nina E. Olson; Benno Torgler
  3. Evaluating the Costs and Benefits of Corporate Tax Incentives By Hania Kronfol; Victor Steenbergen
  4. Correlation in State and Local Tax Changes By Scott R. Baker; Pawel Janas; Lorenz Kueng
  5. Tax Evasion, Technology, and Inequality By James Alm
  6. Larceny in the Product Market: A Hidden Tax? By ; Osborne Jackson
  7. Healthy Climate, Healthy Bodies: Optimal Fuel Taxation and Physical Activity By Inge van den Bijgaart; David Klenert; Linus Mattauch; Simona Sulikova
  8. Predistribution vs. Redistribution: Evidence from France and the U.S By Antoine Bozio; Bertrand Garbinti; Jonathan Goupille-Lebret; Malka Guillot; Thomas Piketty
  9. Have You Benefited From the Tax Reforms? The Distribution of Tax Payments in Sweden after Three Decades of Tax Changes By Hansson, Åsa

  1. By: Hacıoglu Sinem (Bank of England - Bank of England, King‘s College London); Diego Känzig (London Business School); Paolo Surico (London Business School, CEPR - Center for Economic Policy Research - CEPR)
    Abstract: The top quartile of the income distribution accounts for almost half of the pandemic-related decline in aggregate consumption, with expenditure for this group falling much more than income. In contrast, the bottom quartile of the income distribution has seen the smallest spending cuts and the largest earnings drop but their total incomes have fallen by much less because of the increase in government benefits. The decline in consumers' spending preceded the introduction of the lockdown, whose partial lifting has triggered a stronger recovery in sectors with a lower contact rate. The largest spending contractions are concentrated in the most affluent regions. These conclusions are based on detailed high-frequency transaction data on spending, earnings and income from a large fintech company in the United Kingdom.
    Keywords: spending,earnings,income,benefits,heterogeneity,pandemic
    Date: 2020–11
  2. By: James Alm (Tulane University); Kay Blaufus (University of Hanover); Martin Fochmann (Free University of Berlin); Erich Kirchler (University of Vienna); Peter N. C. Mohr (Free University of Berlin); Nina E. Olson (Center for Taxpayer Rights); Benno Torgler (Queensland University of Technology)
    Abstract: Governments have taken remarkable measures during the SARS-CoV-2 pandemic in their efforts to safeguard citizens’ health and the economy. As a consequence, public debts have reached unprecedented levels, which will require at some point higher taxes. Ensuring that citizens pay these taxes requires consideration of the many factors that will likely affect their tax compliance decisions. In this paper, we reflect from a behavioral economic perspective the impact of tax policy measures on the perception, evaluation, and behavior of citizens and derive considerations to devise appropriate tax policies to ensure compliance in the future. We start with speculations about citizens’ views of governmental restrictions and economic stimulus measures in response to the crisis, we apply these speculations to the acceptance and perceived effectiveness of policy measures on citizens’ tax compliance behaviors, and we finish with their likely impact on determinants of tax compliance. Building on the derived insights, we deduce a set of considerations to improve tax compliance – and to generate the necessary tax revenues to deal with the after-effects of SARS-CoV-2 when the pandemic is under control: communication, transparency and justification of measures, access to support, service provision, audits and penalties in case of free-riding, targeted audits, building social norms of cooperation, consideration of framing effects, development of plans and strategies for the future, and anticipation of hindsight biases.
    Keywords: Covid-19 crisis; Tax compliance; Tehavioral economics; Behavioral taxation
    JEL: H12 H20 H26 D91
    Date: 2021–01
  3. By: Hania Kronfol; Victor Steenbergen
    Keywords: Public Sector Development - Public Sector Economics Law and Development - Tax Law Macroeconomics and Economic Growth - Investment and Investment Climate Macroeconomics and Economic Growth - Taxation & Subsidies Public Sector Development - Tax Policy
    Date: 2020
  4. By: Scott R. Baker (Northwestern University, Kellogg School of Management, Department of Finance); Pawel Janas (Kellogg School of Management - Department of Finance); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management)
    Abstract: We develop a comprehensive dataset of state and local taxes from 2000-2015 that includes personal income taxes, property taxes, corporate income taxes, sales taxes, estate taxes and excise taxes. We illustrate how state and local taxes have changed over time, in response to business cycles, and to what extent different taxes co-move within a state or locality. Across states and local jurisdictions, large differences in the mix of taxes are observed, and these differences have tended to become more pronounced over time. Moreover, we note that different types of taxes tend to co-move within a state or local jurisdiction, highlighting the importance for researches to take into account the entirety of the tax system, rather than just a single tax type, when examining household or firm responses to state and local tax changes. At both a state and local level, increases in tax rates of all types tend to increase tax revenue but worsen business conditions and employment.
    Keywords: Local taxes, state taxes, income tax, corporate income tax, sales tax, property tax
    JEL: H20 H71 H72 H77
    Date: 2020–08
  5. By: James Alm (Tulane University)
    Abstract: Ensuring compliance with the tax laws is an enduring challenge for all governments. However, the methods by which governments enforce the tax laws, and by which individuals and firms evade their taxes, change over time, due at least in part to changing technology. In this paper I examine how changing technology, especially changes driven by the transformation of information into digital formats for use by computers, seems likely to affect tax evasion in the years ahead. I argue that many of these changes in technology will improve the ability of governments to decrease tax evasion, mainly by increasing the flow of information to governments. However, I also argue that these changes in technology will open up new avenues by which some individuals and some firms can evade (and avoid) taxes. At this point it is unclear which trend will dominate, so that the effects of technology on the overall level of tax evasion is uncertain. Even so, I believe that the distributional effects of these technological changes are more predictable, given the differential effects of technology on the abilities of individuals of different levels and types of income to evade their taxes. Indeed, I argue that changing technology will make evasion increasingly difficult for most taxpayers, especially those subject to employer withholding and third party information reporting, but that evasion will be increasingly viable for a small number of taxpayers, especially very high income taxpayers. Regardless of the overall impact of technology on the level of tax evasion, I conclude that the effects of technology will likely increase economic inequality.
    Keywords: Tax evasion; Inequality; Technology; Digitalization
    JEL: H26 H22 D03
    Date: 2021–01
  6. By: ; Osborne Jackson
    Abstract: This paper compares the distortionary impact of larceny theft across different product markets, characterizing such crime as a “hidden tax” on producers or consumers. We estimate the size of this tax and how it is affected by exogenous changes in larceny rates driven by the enactment of higher felony larceny thresholds. Pre-enactment hidden tax rates are small, ranging from 0.1 percent to 0.4 percent. These tax rates rise or fall with enactment, varying by product market. Such exogenous changes in the hidden tax induce state-level annual welfare changes that are minimal, ranging from –$1,500 to $4,700 across product markets.
    Keywords: larceny thresholds; crime; product markets; taxation; welfare
    JEL: D60 H20 K14
    Date: 2020–10–01
  7. By: Inge van den Bijgaart; David Klenert; Linus Mattauch; Simona Sulikova
    Abstract: Transport has significant externalities including carbon emissions and air pollution. Public health research has identified additional social gains from active travel, due to health benefits of physical exercise. Per mile, these benefits greatly exceed the external costs from car use. We introduce active travel into an optimal fuel taxation model and analytically characterise the optimal second-best fuel tax. We find that accounting for active travel benefits increases the optimal fuel tax by 49% in the US and 36% in the UK. Fuel taxes should be implemented jointly with other policies aimed at increasing the uptake of active travel.
    Keywords: transport externalities, congestion, active travel, fuel, health behaviour, optimal taxation
    JEL: H23 I12 Q53 Q54 Q58 R41 R48 Z28
    Date: 2020
  8. By: Antoine Bozio (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab); Bertrand Garbinti (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], WIL - World Inequality Lab); Jonathan Goupille-Lebret (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Malka Guillot (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology in Zürich [Zürich], IPP - Institut des politiques publiques, WIL - World Inequality Lab); Thomas Piketty (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab)
    Abstract: How much redistribution policies can account for long-run changes in inequality? To answer this question, we quantify the extent of redistribution over time by the percentage reduction from pretax to post-tax inequalities, and decompose the changes in post-tax inequalities into different redistributive policies and changes in pretax inequalities. To estimate these redistributive statistics, we construct homogenous annual series of post-tax national income for France over the 1900-2018 period, and compare them with those recently constructed for the U.S. We obtain three major findings. First, redistribution has increased in both countries over the period, earlier in the U.S., later in France, to reach similar levels today. Second, the substantial long-run decline in post-tax inequality in France over the 1900-2018 period is due mostly to the fall in pretax inequality (accounting for three quarters of the total decline), and to a lesser extent to the direct redistributive role of taxes, transfers and other public spending (about one quarter). Third, the reason why overall inequality is much smaller in France than in the U.S. is entirely due to differences in pretax inequality. These findings suggest that policy discussions on inequality should, in the future, pay more attention to policies affecting pretax inequality and should not focus exclusively on "redistribution".
    Date: 2020–10
  9. By: Hansson, Åsa (Department of Economics, Lund University)
    Abstract: Thirty years ago, the Swedish tax system underwent a major reform. Since then there have been many changes to the tax system, and the general level of tax revenues has declined by over five percentage points of GDP. The decline in total revenues does not necessarily translate into an evenly distributed decline for taxpayers. This paper studies how tax payments have changed in Sweden since the major tax reform over income distribution, sex, age, and geographical location. The results show that individuals at the bottom and very top of the income distribution have benefited disproportionally more from lower taxes. Labor tax payments as share of labor income have increased across the income distribution and particularity so for middle- and high-income earners.
    Keywords: Tax burden; tax distribution; tax reform
    JEL: D63 H23 H24
    Date: 2020–12–10

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