nep-pub New Economics Papers
on Public Finance
Issue of 2021‒12‒20
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Macroeconomic Effects of Corporate Tax Reforms By Francesco Furno
  2. Tax Policy and Inclusive Growth By Ruud A. de Mooij
  3. Tourist Tax and Ratings of Online Reviews By Antonio Marsi; Emanuela Randon
  4. Million Dollar Baby: Should Parental Benefits Depend on Wages When the Payroll Tax Evasion is Present? By Vitalijs Jascisens; Anna Zasova
  5. Labor Taxation: Insights From The World Economic Forum Survey By Moutsopoulos, Michael; Pelagidis, Theodore

  1. By: Francesco Furno
    Abstract: This paper extends a standard general equilibrium framework with a corporate tax code featuring two key elements: tax depreciation policy and the distinction between c-corporations and pass-through businesses. In the model, the stimulative effect of a tax rate cut on c-corporations is smaller when tax depreciation policy is accelerated, and is further diluted in the aggregate by the presence of pass-through entities. Because of a highly accelerated tax depreciation policy and a large share of pass-through activity in 2017, the model predicts small stimulus, large payouts to shareholders, and a dramatic loss of corporate tax revenues following the Tax Cuts and Jobs Act (TCJA-17). These predictions are consistent with novel micro- and macro-level evidence from professional forecasters and sectoral tax returns. At the same time, because of less-accelerated tax depreciation and a lower pass-through share in the early 1960s, the model predicts sizable stimulus in response to the Kennedy's corporate tax cuts - also supported by the data. The model-implied corporate tax multipliers for Trump's TCJA-17 and Kennedy's tax cuts are +0.6 and +2.5, respectively.
    Date: 2021–11
  2. By: Ruud A. de Mooij
    Abstract: This paper discusses the theory and practice of tax design to achieve an efficient and equitable outcome, i.e. in support of inclusive growth. It starts with a discussion of the key principles from tax theory to guide practical tax design. Then, it elaborates on more granular tax policy, discussing key choices in the structure of the personal income tax on labor and capital income, taxes on wealth, the corporate income tax, and consumption taxes. The paper concludes by highlighting the political economy considerations of the issues with concrete recommedtions as to how to implement tax reform.
    Keywords: tax policy;inclusive growth;inequality;poverty;income distribution;WP;economic rent;personal income;tax liability;cost of capital;external cost;public finance;rate of return; low income; take-home pay; Income; Capital income tax; Income and capital gains taxes; Corporate income tax; Income tax systems; Europe; Global
    Date: 2020–12–04
  3. By: Antonio Marsi; Emanuela Randon
    Abstract: Tourist taxes represent one of the principal sources of revenue for a number of local authorities. Using a dataset of more than 300 thousands reviews on TripAdvisor, we analyze the effect of tourist taxes on online ratings posted by hotel costumers. Online ratings are strategic variables for the competitiveness of hotels and local destinations and so the assessment of the impact of tourist taxes on online reviews is important to design suitable strategies and policies both for firms and local municipalities. We show that the share of complaints about the tax increases with the tax rate, but the relationship gets weaker as the hotel quality increases, suggesting that low-quality costumers are more sensitive to tax increases. Tax mentioning reviews have on average a 20% lower rating and this difference becomes smaller and not significant for high quality hotels. We disentangle the different sources of complaining, finding that the lack of information and the cash payments weight more negatively on the average rating (respectively less 27% and 21%). Using a random-effects logit model we show that what matters for costumers is the percentage tax on the room price and not the absolute amount of the legal tax rates based on the hotel stars. This effect is present only for hotel stays with an average double room price under 100 Euros. Our results provide public authorities with useful suggestions to change the actual tax system by setting the tourist tax as an ad valorem tax on room price and assessing optimal tax rates accordingly to their incidence on the price of the stay.
    JEL: D12 H21 H22 L83 Z3
    Date: 2021–12
  4. By: Vitalijs Jascisens (HSE University); Anna Zasova (Baltic International Centre for Economic Policy Studies (BICEPS))
    Abstract: This paper explores the effect of tying social security benefits to declared wages on firm-worker collusion and strategic income reporting before the benefit entitlement. We use administrative data from Latvia covering the entire working population over a 15-year period from 1996 to 2010 to study generous parental benefits, which depend on the reported wage in the time period before the childbirth. Our analysis delivers three principal results. First, we observe a sharp increase in the wage during the time period taken into account to calculate parental benefits, and interpret the obtained result as a collusive legalization of previously unreported income with an aim to increase the future benefit. Depending on the specification, we conclude that during this period the wage on average increases by 5.4%-7.5%. Second, obtained effects are highly heterogeneous. We find that the wage growth is much higher in small firms, where it is presumably easier to sustain collusion between employees and employers. Finally, we demonstrate that legalization of wages is temporary and lasts only until the end of the period taken into account to calculate parental benefits.
    Date: 2021–11
  5. By: Moutsopoulos, Michael; Pelagidis, Theodore
    Abstract: One of the main topics highlighted in the field of economic policy applications is the impact of taxation on labor. In an era in which macroeconomic stability, technological change, and globalization pressure the job market, there exists no strong consensus in the literature on how exactly taxation influences growth, choice between work and leisure, share of income attributed to labor, or participation in different job market segments. This article focuses on employment levels and uses the results of the World Economic Forum (WEF) Executive Opinion Survey (EOS) between 2013 and 2017 to bypass several challenges often faced in the literature. By doing so, we complement the insights of the existing literature by establishing that, in institutionally mature countries, taxation that is deemed by a survey of business executives to pose a disincentive to work reduces employment.
    Keywords: Labor, Taxation
    JEL: E2 F66 H21 J01
    Date: 2021

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