nep-pub New Economics Papers
on Public Finance
Issue of 2021‒02‒01
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Linear Income Taxation and Education Subsidies under Skill-Biased Technical Change By Bas Jacobs; Uwe Thuemmel
  2. The impact of tax and infrastructure competition on the protability of local firms By Yutao Han,; Patrice Pieretti; Giuseppe Pulina
  3. Effects of Tax-Benefit Policy Changes across the Income Distributions of the EU-27 Countries and the UK: 2019-2020 By EUROMOD, EUROMOD
  4. Redistribution from a joint income-wealth perspective: Results from 16 European OECD countries By Sarah Kuypers; Francesco Figari; Gerlinde Verbist
  5. The Tax Cut and Jobs Act (2017) as a driver of pension derisking: a comprehensive examination By Anantharaman, Divya; Kamath, Saipriya; Li, Shengnan
  6. Who Carries the Burden of the Value-Added Tax? Evidence from Germany By Samina Sultan
  7. Optimal progressivity of personal income tax: a general equilibrium evaluation for Spain By Darío Serrano-Puente
  8. Do tax administrative interventions targeted at small businesses improve tax compliance and revenue collection?: Evidence from Ugandan administrative tax data By Maria Jouste; Milly I. Nalukwago; Ronald Waiswa

  1. By: Bas Jacobs; Uwe Thuemmel
    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: H20 H50 I20 J20 O30
    Date: 2020
  2. By: Yutao Han,; Patrice Pieretti; Giuseppe Pulina
    Abstract: International capital mobility intensifies tax competition between jurisdictions. However, many firms only operate domestically and are internationally immobile. This paper aims to analyze the effect of tax competition on the profitability of local (immobile) firms, especially when tax and non-tax instruments, including infrastructure provision, are involved. We show that tax competition decreases investment and profit of local firms when internationally mobile fims do not benefit suficiently from local infrastructure.
    Keywords: Local firms, multinational rms, tax competition, infrastructure competition, tax harmonization.
    JEL: F21 F23 H25 H26
    Date: 2020–11
    Date: 2021–01–11
  4. By: Sarah Kuypers (University of Antwerp); Francesco Figari (University of Insubria); Gerlinde Verbist (University of Antwerp)
    Abstract: Redistributive analyses typically use household income as the main reference variable to rank households and to assess their tax liabilities and benefit entitlements. However, the importance of wealth, and the potential redistributive effects of wealth-related taxation, are increasingly recognised. By using data from the Household Finance and Consumption Survey (HFCS) as input data for the tax-benefit microsimulation model EUROMOD, we assess the redistributive effects of taxes and benefits against the joint income-wealth distribution for 16 European OECD countries. This is a new approach that extends indicators developed in the asset-based poverty literature. We study wealth-related taxes alongside other tax-benefit instruments. The analysis allows us to gain insight into which types of policies are redistributive in which institutional settings taking account of the distribution of both income and wealth. This paper extends our pilot study of six countries (Kuypers, Figari, & Verbist, 2019), and updates it to 2017 policies.
    JEL: D31 H24 I30
    Date: 2021–01–22
  5. By: Anantharaman, Divya; Kamath, Saipriya; Li, Shengnan
    Abstract: Corporate defined-benefit (DB) pension sponsors in the US are increasingly on a path of “derisking” – by moving pension assets away from equities and towards fixed-income securities that better match the obligations, or by transferring obligations off their balance sheets entirely, via settlements with insurance companies or lump-sum payouts to beneficiaries. In this study, we examine whether the Tax Cut and Jobs Act of 2017 (“TCJA”) served as a driver of pension derisking. Examining behavior in the window between the TCJA’s announcement and its lower tax rate going into effect, we document that sponsors with stronger incentives to derisk their pensions tend to contribute more into their plans in that window, while deductions can still be taken at the higher tax rate – specifically, sponsors expecting large and uncertain contribution requirements for pensions in the future, facing high regulatory costs to maintaining plans, and with competing demands on cash flows. Examining behavior after the TCJA goes into effect, we document that the firms with the largest TCJA-triggered contributions also engage in more derisking subsequently, both by shifting asset allocations and by transferring obligations to other parties. In sum, our findings point to the TCJA having acted as a trigger for what could be a fundamental reorganization of the DB pension landscape in the US.
    Keywords: TCJA; defined-benefit plans; voluntary contributions; derisking; pension asset allocation; pension settlements or buyouts
    JEL: J32 K34 H32 H26 G23
    Date: 2021
  6. By: Samina Sultan
    Abstract: The value-added tax is one of the most important tax revenue sources in many countries. However, it is sometimes considered unfair as it ultimately hits consumption, and poorer households spend a greater share of their income on consumption. But this depends on whether, and to what degree, the value-added tax is actually passed on to consumers. Exploiting an exogenous value-added tax reform in Germany, I use an event study and a differences-in-differences approach to investigate the pass-through to consumers for a wide range of commodities. On average, I find a modestly positive but statistically insignificant effect on prices. However, there are differences in tax incidence between commodity groups and anticipatory price effects well in advance of the actual implementation of the value-added tax reform.
    Keywords: consumer price index, value-added tax, tax incidence, fiscal policy
    JEL: E31 H25 H22 H31
    Date: 2020
  7. By: Darío Serrano-Puente (Banco de España)
    Abstract: Is the Spanish economy positioned at its optimal progressivity level in personal income tax? This article quantifies the aggregate, distributional, and welfare consequences of moving towards such an optimal level. A heterogeneous households general equilibrium model featuring both life cycle and dynastic elements is calibrated to replicate some characteristics of the Spanish economy and used to evaluate potential reforms of the tax system. The findings suggest that increasing progressivity would be optimal, even though it would involve an efficiency loss. The optimal reform of the tax schedule would reduce wealth and income inequality at the cost of negative effects on capital, labor, and output. Finally, these theoretical results are evaluated using tax micro data and describe a current scenario where the income-top households typically face suboptimal effective average tax rates.
    Keywords: income tax, progressivity, inequality, income and wealth distribution, general equilibrium, heterogeneous agents
    JEL: D31 C68 E62 H21
    Date: 2021–01
  8. By: Maria Jouste; Milly I. Nalukwago; Ronald Waiswa
    Abstract: This paper conducts an impact evaluation of the effects of two tax administration interventions?a taxpayer register expansion and education programme, and a new electronic filing system for presumptive tax?on the number of small business taxpayers and presumptive tax revenues in Uganda.
    Keywords: Tax administration, Small business, Tax compliance, Electronic filing, Impact evaluation, Administrative data, Tax administration data
    Date: 2021

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