nep-pub New Economics Papers
on Public Finance
Issue of 2022‒11‒28
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Commodity Taxation When Households Earn Multiple Incomes By Kevin Spiritus
  2. A Synthesis of Local and Effective Tax progressivity Measurement By Chakravarty, Satya R.; Sarkar, Palash
  3. Global profit shifting, 1975-2019 By Ludvig Wier; Gabriel Zucman
  4. The Unequal Incidence of Payroll Taxes with Imperfect Competition: Theory and Evidence By Felipe Lobel
  5. Public spending and growth: a model By Claudio Sardoni
  6. MARKUPS, TAXES, AND RISING INEQUALITY By Stéphane Auray; Aurélien Eyquem; Bertrand Garbinti; Jonathan Goupille-Lebret
  7. Oil Windfalls, Taxation, and Demand for Government Accountability By Alexander James; Dilek Uz
  8. The Distribution of Household Income, 2019 By Congressional Budget Office
  9. The effects of taxation on income inequality in sub-Saharan Africa By Idrissa Ouedraogo; Issa Dianda; Pegdwende Patrik Ouedraogo; Rodrigue Tiraogo Ouedraogo; Bassirou Konfe

  1. By: Kevin Spiritus (Erasmus University Rotterdam)
    Abstract: I characterize the optimal linear commodity taxes when households differ in multiple characteristics and earn multiple incomes, in presence of an optimal non-linear tax schedule on the households’ labour incomes. The government should tax a commodity more heavily if, conditional on labour income, more deserving individuals consume larger quantities of that commodity. This is the case for merit goods, or if the government otherwise seeks to compensate individuals who consume larger quantities of that commodity. Furthermore, the government wishes to tax commodities at different rates to the extent that doing so reduces the distortions caused by the labour income tax. This is the case when individuals with different incomes have different preferences, or when individuals with different labour supplies also have different consumption pattern
    Keywords: optimal commodity taxation, multidimensional taxation
    JEL: H21 H24
    Date: 2022–11–13
  2. By: Chakravarty, Satya R.; Sarkar, Palash
    Abstract: This paper examines theoretical properties of local and global measures of income tax progressivity. In particular, consistency property of global measures with local measures is analyzed. Using a normative approach, an index of performance in effective progression underlying a tax system, in relation to that of a ‘norm’, is suggested and analyzed. The norm chosen here is the welfare level associated with the post-tax distribution resulting from an inequality minimizing taxation policy which maintains pre-tax rank orders of tax payers and does not impose any additional tax burden on them, given that the pre-tax distribution is fixed as well. As the actual post-tax welfare increases, effective progression (hence performance) improves, which ensures that it is possible to elevate the level of performance sequentially, as may be desired by a policy maker, towards achieving the norm welfare.
    Keywords: Taxation, effective progression, inequality minimization, welfare, performance, policy
    JEL: H24
    Date: 2022–10–19
  3. By: Ludvig Wier; Gabriel Zucman
    Abstract: This paper constructs time series of global profit shifting covering the 2015-19 period, during which major international efforts were implemented to curb profit shifting. We find that (i) multinational profits grew faster than global profits, (ii) the share of multinational profits booked in tax havens remained constant at around 37 per cent, and (iii) the fraction of global corporate tax revenue lost due to profit shifting rose from 9 to 10 per cent.
    Keywords: Profit shifting, Multinational firms, Taxation, Corporate tax
    Date: 2022
  4. By: Felipe Lobel
    Abstract: This paper provides a comprehensive examination of a Brazilian corporate tax reform targeted at the sector and product level. Difference-in-differences estimates instrumented by sector eligibility show that a 20 percentage point cut on payroll tax rates caused a 9% employment increase at the firm level, mostly driven by small firms. This expansion is not driven by formalization of existing workers, and it is explained by reduction on separations rather than additional hires. In terms of earnings, there is a significant 4% earnings increase in the long run, which is concentrated at leadership positions. The unequal pass-through worsen within-firm wage inequality. I exploit the exogenous variation on labor cost to document substantial labor market power in Brazil, where wages are marked down by 36%. Consistent with the empirical findings, I develop a model of factor demand with imperfect competition in the goods and labor market to shed light on the mechanism through which imperfect competition drives corporate tax incidence. The model is identified by the reduced form elasticities, and allows me to structurally estimate the capital-labor elasticity of substitution, which differs from the benchmark case of perfect competition.
    Date: 2022–10
  5. By: Claudio Sardoni (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: The major crises that hit the world economy in the last 15 years have caused a growing presence of the state in the economy. Deep crises almost inevitably give rise to growing public interventions to avoid the collapse of the economic and social system. However, the demand for more state interventions does not make it less important to be concerned for the extension and quality of these interventions in order to contain their possible negative effects on the economy as a whole. The paper is an attempt at dealing with these issues by using a simple growth model. Our main result is that growing state interventions, in the form of larger deficits, can produce positive effects on the economy by not simply increasing aggregate demand but, most of all, by contributing to raise the productivity of the economy. An objective that can be realized by mainly devoting public outlays to ‘productive expenditures’, i.e. investment in physical and human capital.
    JEL: E21 E62 H30 H54 H60
    Date: 2022–11
  6. By: Stéphane Auray (ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], CREST-THEMA - 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 - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université); Aurélien Eyquem (UNIL - Université de Lausanne = University of Lausanne); Bertrand Garbinti (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, ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique - Ecole Nationale de la Statistique et de l'Analyse Economique); Jonathan Goupille-Lebret (CNRS - Centre National de la Recherche Scientifique, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique, ENS Lyon, Université de Lyon)
    Abstract: How to explain rising income and wealth inequality? We build an original heterogeneous- agent model with three key features: (i) an explicit link between firm's market power and top income shares, (ii) a granular representation of the tax and transfer system, and (iii) three assets with endogenous portfolio decisions. Using France as an illustration, we look at how changes in markups, taxes, factor productivity, and asset prices affect inequality dynamics over the 1984-2018 period. Rising markups account for the bulk of rising income inequality. Wealth inequality dynamics result mostly from changes in saving rate inequality but only in response to the exogenous changes in taxation and markups. Our results point to the critical importance of endogenous saving decisions in response to exogenous shocks as a key driver of wealth inequality.
    Date: 2022–10–27
  7. By: Alexander James (Department of Economics, University of Alaska Anchorage); Dilek Uz (Department of Economics, University of Nevada Reno)
    Abstract: What determines demand for government accountability? According to the theory of the rentier state, taxation engages an otherwise acquiescent electorate and increases demand for public transparency, accountability, and fiscal efficiency. This paper tests this theory using an online survey-experiment administered in the United States in which subjects are randomly assigned to one of five informational treatments describing the waste or embezzlement of income or oil-tax revenue. We then assess subject demand for accountability. Several insights emerge. First, intentions matter; embezzlement is punished more severely than incompetence. Second, income-tax embezzlement is punished more severely than oil-tax embezzlement, but only among high-income earners. Third, there is weak evidence that patronage (in the form of an oil-financed tax cut) reduces demand for accountability. Considered jointly, these results suggest an interesting Catch-22 in which a lack of taxation causes government waste and corruption, which is often then used to justify opposition to taxation.
    Keywords: Rentier States, Public Finance, Voter Apathy, Political Resource Curse, Survey Experiment
    JEL: Q38 Q32 D72 H71
    Date: 2022–10
  8. By: Congressional Budget Office
    Abstract: No Abstract
    JEL: H20 H24 H50 J30
    Date: 2022–11–15
  9. By: Idrissa Ouedraogo; Issa Dianda; Pegdwende Patrik Ouedraogo; Rodrigue Tiraogo Ouedraogo; Bassirou Konfe
    Abstract: This paper investigates the effects of taxation on income inequality in an unbalanced panel of 45 countries in sub-Saharan Africa over the period 1980-2018. We use instrumental-variable two-stage least squares and instrumental-variable quantile regression estimates. We find that taxation widens income inequality. We also show that the increasing effects of taxation on income inequality are higher in the most unequal countries than in the least unequal countries. Furthermore, we highlight an inverse U-shaped relationship between indirect taxes and income inequality.
    Keywords: Income inequality, Taxation, Regression analysis, Sub-Saharan Africa
    Date: 2022

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