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

  1. A note on capital income taxation with involuntary unemployment By Minoru Watanabe
  2. Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes By Christopher Conlon; Nirupama L. Rao; Yinan Wang
  3. Tax Reforms and Political Feasibility By Felix Bierbrauer; Pierre Boyer; Andrew Lonsdale; Andreas Peichl
  4. Internal Digitalization and Tax-efficient Decision Making By Klein, Daniel; Ludwig, Christopher; Nicolay, Katharina
  5. Effects of the Expanded Child Tax Credit on Employment Outcomes: Evidence from Real-World Data By Elizabeth Ananat; Benjamin Glasner; Christal Hamilton; Zachary Parolin
  6. Top Wealth in America: New Estimates and Implications for Taxing the Rich By Matthew Smith; Owen M. Zidar; Eric Zwick
  7. Free Riding in Networks By Markus Kinateder; Luca Paolo Merlino
  8. Competition Among Public Good Providers for Donor Rewards By Natalie Struwe; James M. Walker; Esther Blanco

  1. By: Minoru Watanabe (Research Fellow, Graduate School of Economics, Kobe University/Hokusei Gakuen University)
    Abstract: This study develops a standard overlapping generations model with imperfect labor markets. The results indicate that a higher capital income tax promotes not only economic growth but also employment if pension benefits exist.
    Date: 2021–10
  2. By: Christopher Conlon; Nirupama L. Rao; Yinan Wang
    Abstract: We find that sin good purchases are highly concentrated with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin tax burdens are poorly explained by demographics (including income), but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 68% of sin taxes, are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.
    JEL: H22 H23 H25 L66
    Date: 2021–10
  3. By: Felix Bierbrauer (Université de Cologne); Pierre Boyer (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Andrew Lonsdale (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Andreas Peichl (LMU - Ludwig-Maximilians-Universität München)
    Abstract: Questions linked to the design and implementation of redistributive tax policies have occupied a growing position on the public agenda over recent years. Moreover, the fiscal pressures brought upon by the current coronavirus crisis will ensure that these issues maintain considerable political significance for years to come. In light of this importance, we present novel research on reforms of income tax systems. Our approach shows that tax reforms wherein the changes in individual tax burdens are larger for taxpayers with higher incomes are of particular interest. We denote such reforms as "monotonic" and show that, under this condition, it is possible to determine the "winners" and "losers" of a given tax reform. One can then conclude whether the monotonic reform is politically feasible, depending on whether a majority of individuals will benefit financially from the policy. An empirical analysis of tax reforms with a focus on the United States and France reveals that past reforms have, by and large, been monotonic. Our approach therefore enables us to test whether a given tax system admits a politically feasible reform and has direct policy relevance for the common types of taxation reforms undertaken by government authorities.
    Date: 2021–09
  4. By: Klein, Daniel; Ludwig, Christopher; Nicolay, Katharina
    JEL: O33 L25 H25 H26 K34
    Date: 2021
  5. By: Elizabeth Ananat (Columbia University); Benjamin Glasner (Columbia University); Christal Hamilton (Columbia University); Zachary Parolin (Columbia University)
    Abstract: Early studies have established that the expanded Child Tax Credit (CTC), which provides monthly cash payments to most families with children in the United States, has substantially reduced poverty and food hardship since its introduction in July 2021. Some researchers posit, however, that the CTC payments may generate negative employment effects that could offset its potential poverty-reduction effects. Scholars have simulated various employment scenarios using different assumed labor supply elasticities, but no study to date has empirically assessed how the CTC payments to date have affected employment outcomes using real-world data. To evaluate actual employment effects, we follow previously-established methodology used to estimate other actual CTC impacts, applying a series of difference-in-differences analyses using data from the monthly Current Population Survey files from April 2021 through August 2021 and the Census Household Pulse Survey microdata collected from April 14 through September 13, 2021. Across both samples and several model specifications, we find very small, inconsistently signed, and statistically insignificant impacts of the CTC both on employment in the prior week and on active participation in the labor force among adults living in households with children. Further, labor supply responses to the change in CTC do not differ for households previously earning within the phase-in range of the prior CTC, in striking contrast to the predictions of the simulation work. Thus, our analyses of real-world data do not support claims that the CTC has negative employment effects that offset its documented reductions in poverty and hardship.
    Keywords: poverty, COVID-19, social policy
    Date: 2021–10
  6. By: Matthew Smith; Owen M. Zidar; Eric Zwick
    Abstract: This paper uses administrative tax data to estimate top wealth in the United States. We assemble new data that links people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed income data reveal that rich individuals earn much more of their interest income in higher-yielding forms, and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately three times higher than the average. Using firm-level characteristics to value firms, we find that twenty percent of total pass-through business wealth accrues to those with losses. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates. Our approach---which builds on Saez and Zucman (2016) and Bricker, Henriques, and Hansen (2018)---reduces bias because wealth and rates of return are correlated. From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 7.6, 5.1, and 3.0 percentage points, respectively, to 31.5%, 15.0%, and 7.0%. While these changes are less dramatic than some prior estimates, wealth is very concentrated: the top 1% holds nearly as much wealth as either the bottom 90% or the "P90-99" class. We discuss implications for income inequality measures, capital tax policy, and savings behavior.
    JEL: D31 E01 E21 H2
    Date: 2021–10
  7. By: Markus Kinateder; Luca Paolo Merlino
    Abstract: Players allocate their budget to links, a local public good and a private good. A player links to free ride on others' public good provision. We derive sufficient conditions for the existence of a Nash equilibrium. In equilibrium, large contributors link to each other, while others link to them. Poorer players can be larger contributors if linking costs are sufficiently high. In large societies, free riding reduces inequality only in networks in which it is initially low; otherwise, richer players benefit more, as they can afford more links. Finally, we study the policy implications, deriving income redistribution that increases welfare and personalized prices that implement the efficient solution.
    Date: 2021–10
  8. By: Natalie Struwe; James M. Walker; Esther Blanco
    Abstract: We present experimental evidence for decision settings where public good providers compete for endogenous donations offered by outside donors. Donors receive benefits from public good provision but cannot provide the good themselves. The performance of three competition mechanisms is examined in relation to the level of public good provision and transfers offered by donors. In addition to a contest with rewards proportional to effort to all public good providers, we study two contests with exclusion from transfers, namely a winner-takes-all and a loser-gets-nothing. We compare behavior in these three decision settings to the default setting of no-transfers. Results for this novel decision environment with endogenous prizes show that contributions to the public good are not significantly different in the winner-takes-all and loser-gets-nothing settings, but donor's transfers are significantly lower in winner-takes-all. Initially, the winner-takes-all and loser-gets-nothing settings lead to a significant increase in public good contributions compared to the setting where transfers are proportional to contributions for everyone; but this difference diminishes over decision rounds. All three contest with endogenous prizes generate consistent and significantly higher public good provision compared to the setting with no-transfers.
    Keywords: Public Good, Institution, Externality, Contests, Laboratory Experiment
    JEL: D70 H41 C92
    Date: 2021

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