nep-pub New Economics Papers
on Public Finance
Issue of 2023‒03‒06
two papers chosen by

  1. Can the acceptance of a carbon tax be increased?. The effect of tax revenue recycling and redistribution among households and companies By Anders Dugstad; Kristine M. Grimsrud; Henrik Lindhjem
  2. Does income transparency affect support for redistribution? Evidence from Finland's tax day By Maurice Dunaiski; Janne Tukiainen

  1. By: Anders Dugstad; Kristine M. Grimsrud (Statistics Norway); Henrik Lindhjem
    Abstract: Effective carbon taxation is essential to achieving the green transition. However, there is typically stiff opposition to carbon taxation due to perceived or actual adverse equity and other impacts. Hence, a better understanding of which factors, including the use of tax revenue, can increase acceptability is essential. To date, stated preference methods have rarely been used to analyse this issue and, when used, have focused only on households’ acceptance. We conduct two identical national choice experiment surveys of Norwegian households and companies, respectively, including carbon tax levels and associated emission reductions and different revenue recycling options as attributes. We find that acceptance for higher tax levels increases among both groups if revenue finances climate mitigation measures. There is some heterogeneity among the groups with regard to using revenue to reduce different dimensions of inequality. Simulating policy options, we find acceptance for the highest carbon tax among both groups when revenue is used both to finance climate mitigation measures and to reduce rural-urban inequalities. This policy option points to an acceptable carbon tax close to an estimated level necessary for reaching the most ambitious climate target set by the Norwegian government. An effective carbon tax level can potentially be achieved in Norway with modest efficiency costs to alleviate inequality.
    Keywords: Climate change; Carbon tax; Policy acceptance; Willingness to pay; Earmarking; Tax revenue
    JEL: H23 Q48 Q58 R48
    Date: 2023–01
  2. By: Maurice Dunaiski (UNODC Research); Janne Tukiainen (Department of Economics, University of Turku.)
    Abstract: This paper examines whether income transparency - the public release of citizens' income information - affects support for redistribution. We leverage a quasi-experiment in Finland, where every year on the so-called tax day, the authorities release income information on Finland's top earners to the public. To identify causal effects we compare respondents who took part in the European Social Survey shortly before and after the event. We find that the tax day increases perceptions that earnings of the top 10% are unfair, but that public support for redistribution remains largely unaffected. A notable exception are top earners, who decrease their support for redistribution, and young people, who increase their support for redistribution. Our results highlight the scope conditions of previous experimental studies, and suggest that increasing exposure to inequality through a real-world policy, rather than experimental treatments, may trigger only marginal changes in support for redistribution.
    Keywords: income transparency, inequality, redistribution, taxes
    JEL: D31 D63 D72 D80 H20 H23 H24 H31
    Date: 2023–02

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