nep-pub New Economics Papers
on Public Finance
Issue of 2022‒03‒28
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal taxation when the tax burden matters By Jessen, Robin; Metzing, Maria; Rostam-Afschar, Davud
  2. Managerial Firms, Taxation and Welfare By Simone MORICONI; Tuna ABAY
  3. To Comply or not to Comply: Persistent Heterogeneity in Tax Compliance and Macroeconomic Dynamics By Leonardo Barros Torres; Jaylson Jair da Silveira, Gilberto Tadeu Lima
  4. Loss-Averse Tax Manipulation and Tax-Preferred Savings By Derek Messacar
  5. Public disclosure of tax information. Compliance tool or social network? By Daniel Reck; Joel Slemrod; Trine Vattø
  6. Creation and Application of the 2015 Input-Output Table for Analysis of Next-generation Energy Systems:Analysis of the Effects of Introducing Carbon Tax By Satoshi Nakano; Ayu Washizu
  7. Inequality and Redistribution in the Netherlands By Céline van Essen; Arjan Lejour; Jan Möhlmann; Simon Rabaté; Arjan Bruil; Wouter Leenders

  1. By: Jessen, Robin; Metzing, Maria; Rostam-Afschar, Davud
    Abstract: Survey evidence shows that the magnitude of the tax liability plays a role in value judgements about which groups deserve tax breaks. We demonstrate that the German tax-transfer system conflicts with a welfarist inequality averse social planner. It is consistent with a planner who is averse to both inequality and high tax liabilities. The tax-transfer schedule reflects non-welfarist value judgements of citizens or different aims of policy makers. We extend our analysis to several European countries and the USA and show that their redistributive systems can be rationalized with an inequality averse social planner for whom the tax burden matters.
    Keywords: Justness,optimal taxation,income redistribution,inequality,welfare criteria
    JEL: D63 D60 H21 H23 I38
    Date: 2022
  2. By: Simone MORICONI (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM – Lille Economie Management, F-59000 Lille, France, CESifo Munich); Tuna ABAY (European University Institute)
    Abstract: This paper investigates the welfare properties of an economy where firms are man- agerial, i.e., composed of two complementary units, each run by its own manager. We show that in the market equilibrium, welfare is generally lower in the case of managerial firms than in that of standard production firms due to the private costs that managers bear to coordinate their operating decisions within the firm. In this organizational set- ting, we also derive a number of interesting results regarding the welfare effects of tax- ation. We show that while a lump-sum tax is welfare-neutral, a nonlump-sum tax may have negative, positive or zero net effect on welfare, depending on market conditions, tax levels, and the structure of managerial incentives. In some cases, these welfare ef- fects are due to ‘tax-induced’ changes in the ownership structure of firms in the industry equilibrium.
    Keywords: : managerial firms, welfare, taxation
    JEL: D21 D60 H21 L23
    Date: 2022–03
  3. By: Leonardo Barros Torres; Jaylson Jair da Silveira, Gilberto Tadeu Lima
    Abstract: We set forth an overlapping generations model in which the microdynamics of tax compliance is coupled to the macrodynamics of the economy. We specify the proportion of individuals who do not comply with their tax obligations as endogenously time-varying using the discrete choice approach, which allows considering both deterministic components and idiosyncratically subjective motivations and proclivities (such as tax morale) as drivers of tax compliance. The model replicates (and hence provides an analytical framework for a potential interpretation of) some pieces of evidence on tax evasion. First, heterogeneity in tax compliance exhibits persistence and fluctuations over the long run. Second, the proportion of non-compliant taxpayers varies positively with the tax rate and negatively with the probability of detection of tax evaders. Third, the impact of a change in the proportion of non-compliant taxpayers on the per capita output over the long run is ambiguous.
    Keywords: Tax compliance; discrete choice modeling; tax morale; heterogeneous behavior; macrodynamics
    JEL: H62 H40 C02 C62 E13
    Date: 2022–03–22
  4. By: Derek Messacar
    Abstract: Using administrative data from Canada linked to a financial capability survey, I show that tax-deductible savings plans are often used to manipulate final balances owed to the central tax authority during tax season. This finding implies a strong avoidance motive for saving, where tax filers manipulate final balances rather than total tax liabilities, consistent with loss-aversion. The magnitude of this effect is economically significant. For example, each $100 owed increases the likelihood of contributing by about half a percentage point. There is evidence that the behavior is driven by tax filers with low financial literacy who make disproportionately large contributions in the last 60 days before the annual deadline.
    Keywords: Loss-aversion, tax avoidance, savings, regression kink design
    JEL: D14 D91 H26 H31
    Date: 2022
  5. By: Daniel Reck; Joel Slemrod; Trine Vattø (Statistics Norway)
    Abstract: We conduct the first-ever study of actual searches done in a public tax disclosure system, analyzing about one million searches done in 2014 and 2015 in Norway. We characterize the social network these searches comprise, including its degree of homophily and reciprocation, and the demographics of targets and searchers. About one-fourth of searches occur within identifiable household and employment networks. Most searchers target people similar to themselves—homophily in network parlance—but young, low-income searchers also target older, successful people and celebrities. A causal research design based on the timing of searches relative to tax filing uncovers no evidence that, upon discovering they were targeted, targets subsequently increase their reported income. The evidence suggests that social comparisons motivate the bulk of searches rather than tax compliance. However, public disclosure may deter evasion even when compliance-motivated searches are rare in equilibrium.
    Keywords: Public disclosure; social network; tax compliance
    JEL: H26 D83 D85
    Date: 2022–03
  6. By: Satoshi Nakano (Faculty of Economics, Nihon-Fukushi University, Japan.); Ayu Washizu (Faculty of Social Sciences, Waseda University, 1-6-1 Nishiwaseda, Shinjuku-ku, Tokyo 169-8050, Japan.)
    Abstract: The Institute for Economic Analysis of Next-Generation Science and Technology, Waseda University, has prepared the Input-Output Table for Analysis of Next-generation Energy Systems (IONGES) and has included the renewable energy sectors in the Input-Output Table of Japan’s Ministry of Internal Affairs and Communications (MIC). To date, we have prepared tables for 2005 and 2011 (hereafter 2005 Table and 2011 Table, respectively) and associated reports have been prepared. We prepared an interregional table and a table with the hydrogen-related sector added to the 2005 Table. Following these tables, the 2015 IONGES was developed and summarized in this study. Carbon pricing (CP), such as a carbon tax, leads to the development of a sustainable low-carbon society, and a precise analysis of the impact of the system on each sector of the economy is essential for the design of the CP system. As an applied analysis using the 2015 IONGES, the introduction of a carbon tax as a global warming countermeasure (GWC) tax based on existing energy-related tax systems was considered, and the effect of the use of renewable energy on the new tax burden was estimated.
    Keywords: Input-Output analysis, Renewable energy, Carbon pricing, Energy-related taxes, Input- Output Table for Analysis of Next-generation Energy Systems (IONGES)
    Date: 2022–03
  7. By: Céline van Essen (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Lejour (CPB Netherlands Bureau for Economic Policy Analysis); Jan Möhlmann (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Bruil (CBS); Wouter Leenders (UC Berkeley)
    Abstract: How high is income inequality in the Netherlands? How progressive are taxes and how much income does government spending redistribute? This study presents the most exhaustive responses for the Netherlands to these questions to date. We combine detailed administrative records on the universe of the Dutch population with national accounts aggregates to provide a thorough description of income inequality before and after taxation and government spending. Overall, taxes and government spending reduce the top 10%'s income share from 31% to 26%. We decompose this difference between pre- and post- tax income and show two main results. First, the tax system is regressive due to high consumption taxes, flat social contributions and a low tax on capital income. Second, the entire reduction in inequality comes from government spending that is targeted at the bottom of the distribution. We finally provide a wide set of alternative scenarios to investigate the sensitivity of our results to different distributional assumptions. Our main conclusions are robust to this sensitivity analysis.
    JEL: D3 H2 H3 H5
    Date: 2022–03

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