nep-pub New Economics Papers
on Public Finance
Issue of 2022‒06‒13
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxes, Risk Taking, and Financial Stability By Kogler, Michael
  2. The quality of public finances By Thöne, Michael
  3. Income Tax data and Facets of transparency. By Rao, R. Kavita
  4. How to Redistribute the Revenues from Climate Policy? A Dynamic Perspective with Financially Constrained Households By Ulrich Eydam; Francesca Diluiso
  5. Profit Shifting, Employee Pay, and Inequalities: Evidence from US-Listed Companies By Baptiste Souillard
  6. Automatic Tax Filing: Simulating a Pre-Populated Form 1040 By Lucas Goodman; Katherine Lim; Bruce Sacerdote; Andrew Whitten
  7. A basic income for France: Ideas for a debate By Richiardi, Matteo

  1. By: Kogler, Michael
    Abstract: After the global financial crisis, the use of taxes to enhance financial stability received new attention. This paper compares two ways of taxing bank leverage, namely, an allowance for corporate equity (ACE), which addresses the debt bias in corporate taxation, and a Pigovian tax on bank debt (bank levy). We emphasize financial stability gains driven by lower bank asset risk and develop a principal-agent model, in which risk taking depends on the bank's capital structure and, by extension, on the tax treatment of debt and equity because of moral hazard. We find that (i) the ACE unambiguously reduces risk taking, (ii) bank levies reduce risk taking if they are independent of bank performance but may be counterproductive otherwise, (iii) high corporate tax rates render the bank levies less effective, and (iv) taxes are especially effective if capital requirements are low.
    Keywords: Pigovian taxes, corporate tax reform, bank risk taking, financial stability
    JEL: G21 G28 H25
    Date: 2022–05
  2. By: Thöne, Michael
    Abstract: The concept of the "quality of public finances" (QPF) covers many qualitative and structural issues of fiscal policy. This chapter traces the origins of the concept of QPF to the Lisbon Strategy and the subsequent EPC Working Group on "Quality of Public Finances" (2004-2007). At its core, the QPF focuses on the impact that the composition of public spending has on long-term goals such as economic growth. Growth- and sustainability-enhancing public spending comprises infrastructure investment, human capital investment (education, health, family policy, gender policy) and spending on natural capital and climate protection. Today, QPF indicators can very helpful in national fiscal governance and for the supranational surveillance as in the EU. A future QPF approach for the 2020s should help to prioritize inclusive growth and decoupling economic growth from the use of finite resources. Quality indicators can also help to determine the legit- imate levels of new government debt ("green golden rule").
    Keywords: Quality of public finances (QPF),expenditure composition,growth-enhancing public spending,fiscal governance,decoupling,green golden rule
    JEL: E62 H11 H50 H52 H54 H61
    Date: 2022
  3. By: Rao, R. Kavita (National Institute of Public Finance and Policy)
    Date: 2022–05
  4. By: Ulrich Eydam (University of Potsdam); Francesca Diluiso (Mercator Research Institute on Global Commons and Climate Change (MCC))
    Abstract: In light of climate change mitigation efforts, revenues from climate policies are growing, with no consensus yet on how they should be used. Potential efficiency gains from reducing distortionary taxes and the distributional implications of different revenue recycling schemes are currently debated. To account for households heterogeneity and dynamic trade-offs, we study the macroeconomic and welfare performance of different revenue recycling schemes using an Environmental Two-Agent New-Keynesian model, calibrated on the German economy. We find that, in the long run, welfare gains are higher when revenues are used to reduce distortionary taxes on capital, but this comes at the cost of higher inequality: while all households prefer labor income tax reductions to lump-sum transfers, only financially unconstrained households are better off when reducing taxes on capital income. Interestingly, we find that over the transition period relevant to meet short-medium run climate targets, labor income tax cuts are the most efficient and equitable instrument.
    Keywords: double dividend, E-DSGE, environmental tax reform, non-Ricardian households, revenue recycling
    JEL: E62 H23 H31 Q58
    Date: 2022–05
  5. By: Baptiste Souillard
    Abstract: Corporate tax avoidance has regularly been accused of aggravating income inequalities. Yet, systematic evidence on this matter is still lacking. To fill this gap, the present paper explores the effect of profit shifting on employee pay among S&P 1500 companies. The study shows that its effect indeed varies across occupations. Chief executive officers and chief financial officers receive higher compensations when their firm starts operating in tax havens. Non-executive employees, if anything, see their wages fall in the meantime. Furthermore, the inequality-deepening impact of firm entry into tax havens is driven by companies that reward executives on an after-tax basis and more pronounced in intangible-intensive companies. These new findings enrich our understanding of the distributional consequences of profit shifting. They also cast light on the evolution of income inequalities, public opinion about globalization, and ongoing debates on international tax reforms.
    Keywords: employee pay, multinational enterprises, profit shifting, tax havens, income inequalities
    JEL: F16 H26 J30 M12
    Date: 2022
  6. By: Lucas Goodman; Katherine Lim; Bruce Sacerdote; Andrew Whitten
    Abstract: Each year Americans spend over two billion hours and $30 billion preparing individual tax returns, and these filing costs are regressive. To lower and redistribute the filing burden, some commentators have proposed having the IRS pre-populate tax returns for individuals. We evaluate this hypothetical policy using a large, nationally representative sample of returns filed for the tax year 2019. Our baseline results indicate that between 62 and 73 million returns (41 to 48 percent of all returns) could be accurately pre-populated using only current-year information returns and the prior-year return. Accuracy rates decline with income and are higher for taxpayers who have fewer dependents or are unmarried. We also examine 2019 non-filers, finding that pre-populated returns tentatively indicate $9.0 billion in refunds due to 12 million (22 percent) of them.
    JEL: H0 H2 H24 I3
    Date: 2022–04
  7. By: Richiardi, Matteo
    Abstract: The purpose of this note is to discuss the distributional effects of some a priori identified UBI schemes, as an illustration of the different trade-offs involved, and to foster the debate around UBI in France. All these schemes share the feature of retaining some limited form of targeting - in particular discriminating access to the scheme and generosity of the benefit by age. We find that the option funded only by the elimination of selected targeted benefits is regressive on average, and that only by funding the UBI with a significant increase in general taxation, we are able to obtain a reduction in poverty rates. We also consider a more limited basic income scheme targeted to young adults between the age of 20 and the age of 24 (included) only, funded by an increase in all marginal tax rates of 3 percentage points (with no changes to the personal tax allowance). No benefits are eliminated in this case. Results point to drastic improvements for the targeted group and their families, while the costs remain manageable as they are shared by the whole population of taxpayers.
    Date: 2022

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