nep-pub New Economics Papers
on Public Finance
Issue of 2022‒04‒04
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Immovable Property Taxation for Sustainable and Inclusive Growth By Alexander Leodolter; Savina Princen; Aleksander Rutkowski
  2. Taxing the Gender Gap: Labor Market Effects of a Payroll Tax Cut for Women in Italy By Enrico Rubolino
  3. Should we worry about public debt? An empirical analysis of r – g in OECD countries. By Freddy Heylen; Marthe Mareels; Christophe Van Langenhove
  4. Taxation of part-time work in the OECD By Michelle Harding; Dominique Paturot; Hannah Simon
  5. Fiscal externalities in multilevel tax structures: Evidence from concurrent income taxation By Federico Revelli; Tsung-Sheng Tsai; Roberto Zotti
  6. Using the Value Added Tax for Redistributive Purposes in Italy: Is it Still Worth? By Paolo Liberati; Federica Lanterna
  7. Fiscal Multipliers and Evidence on Effectiveness of Fiscal Policy in Malawi By Kumwenda, Thomson Nelson

  1. By: Alexander Leodolter; Savina Princen; Aleksander Rutkowski
    Abstract: A well-designed recurrent tax on residential property (RRPT) can be an important element of the tax mix being able to foster growth, address policy issues related to inequality and contribute to the green transition. Nevertheless, tax revenues from recurrent property taxes are low in EU Member States. The paper first examines the design of efficient property taxation, which also includes removing the homeownership bias in taxation. Subsequently, it provides an overview of RRPT policies in EU Member States and discusses the political economy of property tax reforms. Finally, potential RRPT reforms to reduce inequality and support environmental goals are explored. An RRPT with a progressive rate schedule and a regularly updated tax base factoring in the energy performance of the building is able to support growth, reduce income inequality and contribute to a sustainable environment.
    JEL: D1 D3 D31 H2 H21 H22 H22 H24
    Date: 2022–01
  2. By: Enrico Rubolino
    Abstract: This paper studies the labor market effects of a large employer-borne payroll tax cut for unemployed women, introduced in Italy since 2013. I combine social secu- rity data with several empirical approaches, leveraging the time-limited applica- tion of the tax scheme and discontinuities in eligibility criteria across municipali- ties, cohorts, and occupations. I find that the payroll tax cut generates long-lasting growth in female employment, reduces the time spent on welfare, and spurs busi- ness growth, without crowding out male employment. By contrast, the tax cut does not raise net wages, suggesting that tax incidence is mostly on firms. A cost- benefit analysis implies that the net cost of the policy is nearly half of the budgetary cost. These findings suggest that employer-borne payroll tax cuts are an efficient strategy to raise demand for female labor and tackle the gender employment gap, but they are not sufficient for reducing the gender pay gap.
    Keywords: gender gap, female employment, payroll tax, tax incidence
    JEL: H22 J21 J31
    Date: 2022–01
  3. By: Freddy Heylen; Marthe Mareels; Christophe Van Langenhove (-)
    Abstract: The difference between the implicit nominal interest rate and the growth rate of nominal GDP is a key determinant of the dynamics and the sustainability of public debt. This paper studies the determinants of r - g in a panel of 17 OECD countries since the early 1980s. Whereas the focus of existing studies is mainly on fiscal, monetary and financial drivers of the interest–growth difference, our approach and contribution are to include and highlight in particular the impact of real long-run drivers, such as technical progress, employment growth, components of demographic change, and income inequality. This allows us to derive empirically based projections for r - g beyond the next five or ten years. Our projections suggest that r - g remains negative for the next two decades in most European countries that we study, but not in the United States. The debt-carrying capacity of governments in Europe is structurally higher now than in recent decades. This allows to worry less about public debt, but does not exempt policy makers from the task to strongly monitor their expenditures and balances, given major challenges ahead.
    Keywords: public debt, r - g, fiscal sustainability, fiscal rules, demographic change, inequality
    JEL: E43 E62 H63 H68 J11
    Date: 2022–02
  4. By: Michelle Harding; Dominique Paturot; Hannah Simon
    Abstract: The share of part-time employment in total employment has risen in most OECD countries over the past decades. While this is often associated with increased female labour force participation and the desire of many workers to achieve an improved work-life balance, there has been a significant decline in the average earnings of part-time workers relative to full-time workers, as well as an increase in involuntary part-time employment in a number of countries. This paper presents a summary of the taxation of part-time work in OECD countries. It includes new calculations of the effective tax rates on part-time work including those for male and female part-time workers and for different household types. These indicators provide an evidence base for policymakers looking to understand the impact of the tax system on the choice of employment form. The analysis shows that average tax rates for part-time workers are lower than those applied to full-time workers in almost all OECD countries, reducing post-tax gender wage gaps, although marginal tax rates are often higher for part-time workers. These differences between the taxation of part-time and full-time workers are largely due to differences in earnings levels, and therefore to the progressivity of countries’ tax systems, rather than to differences in the tax treatment applied to part-time workers relative to full-time workers.
    Date: 2022–03–14
  5. By: Federico Revelli (Department of Economics and Statistics "S. Cognetti de Martiis," University of Torino, Campus Luigi Einaudi); Tsung-Sheng Tsai (Department of Economics, National Taiwan University); Roberto Zotti (Department of Economics and Statistics "S. Cognetti de Martiis," University of Torino, Campus Luigi Einaudi)
    Abstract: This paper exploits the multi-tiered structure of personal income taxation in Italy to investigate within-tier (horizontal) and between-tiers (vertical and diagonal) fiscal externalities. Estimation of an unrestricted income tax reaction function on municipalities located at internal regional borders using off-border Wald-type grouping variables as well as the staggered schedule of mayoral elections as instruments for endogenous spatial lags reveals strong positive spatial dependence in municipal tax rates. On the other hand, there is no evidence of a response of municipal tax rates to regional tax policies, suggesting that border discontinuity estimators that rely on consolidated spatial specifications (lower-plus-upper-tier tax rates) impose restrictions on the parameters of the reaction function that are unwarranted in these circumstances.
    Keywords: fiscal externalities; income taxation; grouping instrumental variable; border discontinuity estimator
    Date: 2022–01
  6. By: Paolo Liberati; Federica Lanterna (University Roma Tre, Department of Economics)
    Abstract: This paper shows that a Vat structure with multiple tax rates in Italy is not the most effective way to pursue redistributive aims. As the tax revenue of the Italian Vat is particularly affected by the use of reduced tax rates and exemptions, compared to other European countries, we suggest that a shift to a uniform Vat associated to cash transfers to households with children might better achieve redistributive targets on the neediest part of the population. This outcome could even be potentially improved by considering that a uniform Vat may significantly reduce Vat evasion due to the difference of tax rates applied to sales and purchases.
    Keywords: Vat, Redistribution, Cash transfers, Italy
    JEL: H25 H20 H23
    Date: 2022–02
  7. By: Kumwenda, Thomson Nelson
    Abstract: This study sheds light on the effects of fiscal policy on the Malawian economy by measuring the value of different Keynesian multipliers and identifying the possible origins of GDP fluctuation. The quantitative method adopted is the Bayesian estimation of a Dynamic and Stochastic General Equilibrium (DSGE) model based on data from the National Statistic Office and Reserve Bank of Malawi over the period 2004Q1-2020Q2. The Keynesian multiplier for government expenditure has been estimated at -0.81 and -1.50 at impact and remains negatively strong in subsequent periods for Output and positive for subsequent period for private investments or aggregate demand; (iii) an decrease in consumption taxes has a positive impact on national production, private investments and negative impact on general consumption, the consumption tax multiplier has been estimated at 1.22 for GDP, 0.69 for private investments and -0.64 for consumption for Ricardians households. (iii) the decrease of employment tax has a negative impact on GDP, private investments and positive impact on consumption for Non Ricardians households. This study shows that overall, the variability of production and private consumption is due in large part to public investment and monetary policy shocks, and this effect is persistent and significant over time. The effects of the public investment shock diminish over time, while those relating to the consumption tax are increases over time.
    Keywords: DSGE; Bayesian; Ricardian; Non-Ricardian households; multiplier; Fiscal policy
    JEL: E17 E32 E62
    Date: 2022–02

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