nep-pub New Economics Papers
on Public Finance
Issue of 2021‒03‒15
twelve papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Who Truly Bears (Bank) Taxes? Evidence from Only Shifting Statutory Incidence By Gabriel Jiménez; David Martínez-Miera; José-Luis Peydró
  2. Tax Refund Uncertainty: Evidence and Welfare Implications By Sydnee Caldwell; Scott Nelson; Daniel C. Waldinger
  3. Assessing income tax perturbations By Vidar Christiansen; Zhiyang Jia; Thor O. Thoresen
  4. How can culture affect taxation? A postmaterialism value approach By Nicolae-Bogdan IANC; Thierry BAUDASSE
  5. Public Safety under Imperfect Taxation By Treich, Nicolas; Yang, Yuting
  6. Aspects of Environmentally Beneficial Tax Incentives. A Literature Review By Angela Köppl; Margit Schratzenstaller
  7. A veil of ignorance: uncertain and ambiguous individual productivity supports stable contributions to a public good By Zack Dorner; Steven Tucker; Gazi Hassan
  8. Quasi-carbon taxation - The German eco tax and its impact on CO2 emissions By Runst, Petrik; Höhle, David
  9. Heterogeneous price and quantity effects of the real estate transfer tax in Germany By Christofzik, Désirée I.; Feld, Lars P.; Yeter, Mustafa
  10. Reforming the individual income tax in Spain By Nezih Guner; Javier López-Segovia; Roberto Ramos
  11. Taxes and business philanthropy in Armenia By Asatryan, Zareh; Joulfaian, David
  12. How Do Taxpayers Respond to Tax Subsidy for Long-Term Savings? Evidence from Thailand's Tax Return Data By Athiphat Muthitacharoen; Trongwut Burong; Athiphat Muthitacharoen

  1. By: Gabriel Jiménez (Banco de España); David Martínez-Miera (Universidad Carlos III de Madrid and CEPR); José-Luis Peydró (Imperial College London, ICREA, Universitat Pompeu Fabra, CREI, Barcelona GSE, and CEPR)
    Abstract: We show strong overall and heterogeneous economic incidence effects, as well as distortionary effects, of only shifting statutory incidence (i.e., the agent on which taxes are levied), without any tax rate change. For identification, we exploit a tax change and administrative data from the credit market: (i) a policy change in 2018 in Spain shifting an existing mortgage tax from being levied on borrowers to being levied on banks; (ii) some areas, for historical reasons, were exempt from paying this tax (or have different tax rates); and (iii) an exhaustive matched credit register. We find the following robust results: First, after the policy change, the average mortgage rate increases consistently with a strong – but not complete – tax pass-through. Second, there is a large heterogeneity in such pass-through: larger for borrowers with lower income, a smaller number of lending relationships, not working for the lender, or facing less banks in their zip-code, thereby suggesting a bargaining power mechanism at work. Third, despite no variation in the tax rate, and consistent with the non-full tax pass-through, the tax shift increases banks’ risk-taking. More affected banks reduce costly mortgage insurance in case of loan default (especially so if banks have weaker ex-ante balance sheets) and expand into non-affected but (much) ex-ante riskier consumer lending, experiencing even higher ex-post defaults within consumer loans.
    Keywords: taxes, incidence, banks, inequality, risk-taking, mortgages
    JEL: E51 G21 G28 G51 H22
    Date: 2020–12
  2. By: Sydnee Caldwell (University of California, Berkeley - Haas School of Business; University of California, Berkeley - Department of Economics); Scott Nelson (University of Chicago - Booth School of Business); Daniel C. Waldinger (New York University (NYU) - Furman Center for Real Estate and Urban Policy)
    Abstract: Transfers paid through annual tax refunds are a large but uncertain source of income for poor households. We document that low-income tax-filers have substantial subjective uncertainty about these refunds. We investigate the determinants and consequences of refund uncertainty by linking survey, tax, and credit bureau data. On average, filers’ expectations track realized refunds. More uncertain filers have larger differences between expected and realized refunds. Filers borrow in anticipation of their refunds, but more uncertain filers borrow less, consistent with precautionary behavior. A simple consumption-savings model suggests that refund uncertainty reduces the welfare benefits of the EITC by about 10 percent.
    Date: 2021
  3. By: Vidar Christiansen; Zhiyang Jia; Thor O. Thoresen (Statistics Norway)
    Abstract: We present a scheme for analysing income tax perturbations, applied to a real Norwegian tax reform during 2016 - 2018. The framework decomposes the reform into a structural reform part and a tax level effect. The former consists of a distributional impact and a social e¢ ciency effect measured as the behavioural-induced change in tax revenue. Considering the overall welfare e¤ect conditional on inequality aversion, we back out the pivotal value of the decision makers’ inequality aversion, according to which unfavourable redistributional e¤ects exactly cancel out a social efficiency enhancement.
    Keywords: income tax; tax reform; tax perturbation; inequality aversion
    JEL: H2 H21 H24
    Date: 2020–12
  4. By: Nicolae-Bogdan IANC; Thierry BAUDASSE
    Keywords: , culture, social capital, taxation
    Date: 2021
  5. By: Treich, Nicolas; Yang, Yuting
    Abstract: Standard benefit-cost analysis often ignores distortions caused by taxation and the heterogeneity of taxpayers. In this paper, we theoretically and numerically explore the effect of imperfect taxation on the public provision of mortality risk reductions (or public safety). We show that this effect critically depends on the source of imperfection as well as on the individual utility and survival probability functions. Our simulations based on the calibration of distributional weights and applied to the COVID-19 example suggest that the value per statistical life, and in turn the optimal level of public safety, should be adjusted downwards because of imperfect taxation. However, we also identify circumstances under which this result is reversed, so that imperfect taxation cannot generically justify less public safety.
    Keywords: Public safety; Environmental health; Imperfect taxation; Value per statistical life; Distortionary taxation; Wealth inequality; Risk aversion
    JEL: D61 H21 H41 I18 Q51
    Date: 2021–02–07
  6. By: Angela Köppl; Margit Schratzenstaller
    Abstract: While environmental taxes aim at making environmentally harmful behaviour more costly, the opposite is true for environmentally beneficial tax incentives. Tax incentives imply foregone public revenues to favour less polluting consumption and investment activities in order to achieve environmental policy goals. While there is a large body of theoretical literature on environmental taxes and emissions trading, the theoretical literature on environmentally beneficial tax incentives (as well as direct subsidies) is rather slim. Most of the literature in the field of beneficial tax incentives consists of empirical case studies on concrete tax incentives that have been introduced in individual countries. The paper provides a review of theoretical and empirical literature addressing the effects of environmentally beneficial tax incentives. Hereby, the review of empirical evidence on the impact of specific tax incentives to reduce greenhouse gas emissions focuses on tax incentives in the transport sector and particularly on those attached to vehicle taxation aiming at supporting the decarbonisation of the car fleet. We also summarise the sparse empirical evidence on tax incentives intended to support the use of public transport, green R&D, and energy efficiency.
    Keywords: Carbon taxation, environmental taxation, price-based instruments, tax incentives, climate policy
    Date: 2021–02–04
  7. By: Zack Dorner (University of Waikato); Steven Tucker (University of Waikato); Gazi Hassan (University of Waikato)
    Abstract: The linear public goods game with a voluntary contribution mechanism (VCM) has a large literature providing many insights for the field. Recent papers have investigated impacts on contributions of heterogeneity, risk and ambiguity in marginal per capita return (MPCR) from the public good. We investigate a neglected, but highly relevant set up. In our experiment, the voluntary contribution of one individual to the public good may be more/less productive than another, and this productivity may be uncertain or ambiguous. We have four treatments: HOMOGENOUS (all members of the fixed groups of four are of equal productivity), CERTAIN (two high productivity, two low, but randomly switching in future periods), UNCERTAIN (each subject has a 50-50 lottery of being high or low productivity) and AMBIGUOUS (each subject has an unknown probability of being high or low). High productivity subjects contribute more in the CERTAIN treatment. We find contribution levels are stable in the three treatments over the 10 periods, whereas contributions in the HOMOGENOUS control decline as per the standard finding in a public goods game. These results suggest a natural veil of ignorance about current or future individual productivity, and a social norm of the highly productive contributing more, support a more stable level of contributions over time. Our results are relevant to many field examples, such as contributing to the public good by wearing a face mask in a pandemic, given it is uncertain/ambiguous whether the wearer is contagious (high productivity) or not (low productivity).
    Keywords: ambiguity; heterogeneous productivity; public goods game; social norms; uncertainty; voluntary contribution mechanism
    JEL: C92 D62 D63 D64 H41
    Date: 2021–03–08
  8. By: Runst, Petrik; Höhle, David
    Abstract: Many countries have only recently introduced carbon taxation to reduce emissions and the time series data for evaluating these policies is not available yet. Consequently, we use the imposition quasi-carbon-taxes in the German transportation sector, i.e. taxes on fuel that are not calculated based on actual CO2content but which raise the implicit price of carbon emissions, to evaluate the effectiveness of environmental taxation. Our results indicate that the carbon price increase by about 66 €/t CO2led toa considerable decline of transport emissions by 0.2 to 0.35 t per person and year. Our quantitative results as well as a detailed qualitative analysis of a German car manufacturer's business reports suggests that the tax triggered an improvement in engine technology as well as an increased share of diesel engines.
    Keywords: Carbon taxation,transport sector,carbon emissions
    JEL: H23 Q48 R48
    Date: 2021
  9. By: Christofzik, Désirée I.; Feld, Lars P.; Yeter, Mustafa
    Abstract: Using quarterly data for German counties, we study how housing prices and offers respond to higher transaction costs induced by tax increases. Since 2006, states can set their own tax rates on real estate transfers. Several and substantial tax hikes generate variation across time and states which we exploit in our empirical analysis using an event study design. Our results indicate that prices and offers decrease significantly by 3% and 6% already in the quarter in which the tax increase is announced in press but rise subsequently. Furthermore, we find heterogeneous responses when distinguishing between different types of counties. Housing prices decrease persistently in shrinking counties, while this is at most temporarily the case in growing, central and peripheral counties. This implies that the economic incidence of this tax varies across transactions.
    Keywords: Real estate transfer tax,real estate prices,housing market,tax incidence,anticipation effects
    JEL: H20 H22 H71 R32 R38
    Date: 2020
  10. By: Nezih Guner (CEMFI); Javier López-Segovia (CEMFI); Roberto Ramos (Banco de España)
    Abstract: Can the Spanish government generate more tax revenue by making personal income taxes more progressive? To answer this question, we build a life-cycle economy with uninsurable labor productivity risk and endogenous labor supply. Individuals face progressive taxes on labor and capital incomes and proportional taxes that capture social security, corporate income, and consumption taxes. Our answer is yes, but not much. A reform that increases labor income taxes for individuals who earn more than the mean labor income and reduces taxes for those who earn less than the mean labor income generates a small additional revenue. The revenue from labor income taxes is maximized at an effective marginal tax rate of 51.6% (38.9%) for the richest 1% (5%) of individuals, versus 46.3% (34.7%) in the benchmark economy. The increase in revenue from labor income taxes is only 0.82%, while the total tax revenue declines by 1.55%. The higher progressivity is associated with lower aggregate labor supply and capital. As a result, the government collects higher taxes from a smaller economy. The total tax revenue is higher if marginal taxes are raised only for the top earners.The increase, however, must be substantial and cover a large segment of top earners. The rise in tax collection from a 3 percentage points increase on the top 1% is just 0.09%. A 10 percentage points increase on the top 10% of earners (those who earn more than €41,699) raises total tax revenue by 2.81%.
    Keywords: taxation, progressivity, top earners, labor supply, Laffer curve
    JEL: E21 E6 H2 J2
    Date: 2020–12
  11. By: Asatryan, Zareh; Joulfaian, David
    Abstract: The majority of countries around the world provide tax incentives for business philanthropy. However, little is known about the responsiveness of businesses to this tax treatment. This paper expands on this scant literature by focusing on the Armenian tax system which provides incentives for business philanthropy. The support takes the form of a deduction capped at a fraction of business receipts. This generates a kink beyond which the marginal tax subsidy drops to zero. Using administrative panel data for the years 2007 through 2017, we find strong evidence of bunching by Armenian firms at the kink, with a sizeable tax elasticity of giving at the intensive margin. The evidence on bunching is robust to whether firms have been audited, and to whether any tax deficiencies are observed. This suggests that the observed response is likely to be real rather than being driven by reporting responses.
    Keywords: Business philanthropy,charitable giving,corporate income taxes,firm behavior,bunching,tax-price elasticity
    JEL: H25 H32 M14
    Date: 2021
  12. By: Athiphat Muthitacharoen; Trongwut Burong; Athiphat Muthitacharoen
    Abstract: This paper uses a panel of personal income tax return data for the population of Thai tax filers to examine how individuals respond to tax subsidy for long-term savings. We utilize the 2013 tax reform that lowered the price subsidy for long-term savings in order to obtain causal identification. Our difference-in-difference analysis illustrates that there is a considerable heterogeneity in the individual responses to the subsidy cut—with middle-income taxpayers responding much greater than their high-income counterparts. Among the middle-income group, we also find that the subsidy reduction has larger effects on decisions of smaller contributors. Our findings shed light on the heterogeneity of individual responses which are crucial for policymakers who consider an incremental change in the existing tax incentive scheme.
    Keywords: personal income tax, tax subsidy, long-term savings, retirement savings, developing countries
    JEL: H24 H31
    Date: 2021

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