nep-pub New Economics Papers
on Public Finance
Issue of 2023‒07‒31
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Cliff edges in the Irish Tax-Benefit system By Keane, Claire; Doolan, Claire
  2. Reforming energy excise duties: a possible balance between environmental and redistributive objectives By Federica Lanterna
  3. How does bonus depreciation affect real investment? Effect size, asset structure, and tax planning By Eichfelder, Sebastian; Knaisch, Jonas; Schneider, Kerstin
  4. Global public goods, fiscal policy coordination, and welfare in the world economy By Pierre-Richard Agénor; Luiz Awazu Pereira da Silva
  5. Rural Migration Responses to the Earned Income Tax Credit By McDonald, Tia M.; Durst, Ron L.
  6. Employment versus Efficiency: Which Firms Should R&D Tax Credits Target? By Anna Bernard; Rahim Lila; Joana Silva
  7. The 2023 Long-Term Budget Outlook By Congressional Budget Office
  8. Wealth and Income Responses to Dividend Taxation: Evidence from France By Marie-Noëlle Lefebvre; Eddy Zanoutene
  9. Public Disclosure and Tax Compliance: Evidence from Uganda By Tanner Regan; Priya Manwaring

  1. By: Keane, Claire; Doolan, Claire
    Date: 2023–06
  2. By: Federica Lanterna (University Roma Tre, Department of Economics)
    Abstract: The paper suggests a possible strategy to reform energy excise duties to address the issue of climate change, following the provisions of the proposed revision of the Energy Taxation Directive. The analysis focuses on three products: petrol, diesel, and electricity consumption. The logic of the environmental reform follows the double dividend theory. Indeed, using a micro-simulation model on data from the Household Budget Survey provided by the Italian National Statistics Institute, a first reform scenario is simulated for the values of the excise duties mentioned. The focus is on the additional revenue generated by the environmental reform, which will be used to intervene firstly on VAT, the main indirect tax in Italy, and secondly on excise duties themselves. The aim is to demonstrate that more robust redistributive effects can be achieved by using public expenditure to limit the regressive effect of the environmental reform, working with a comprehensive tax reform.
    Keywords: Tax Reform, Energy excise duties, VAT, Redistribution
    JEL: H20 H23 H31
    Date: 2023–07
  3. By: Eichfelder, Sebastian; Knaisch, Jonas; Schneider, Kerstin
    Abstract: We analyze how tax incentives (bonus depreciation) affect real investment choices of firms by exploiting an exogenous variation in regional tax regulation in former East Germany (Development Area Law, DAL). Our rich administrative panel data for the universe of German manufacturing firms at the establishment level allow us not only to identify an aggregate effect, but also to identify which types of investment (equipment, buildings, land) are are most affected (asset structure). Our baseline results suggest that the DAL increased real gross investment by 16.0% to 19.9%. This aggregate effect is primarily driven by additional investments in buildings (76.6% to 92.3%) and land (108.0% to 121.3%) investments, which have the longest regular depreciation periods in absence of bonus depreciation. The impact on equipment investment is significantly smaller (7.3% to 10.5%). Hence, firms did not only increase their real investment, but also adjusted their asset structure in response to the tax incentive. Addressing firm heterogeneity, we observe a stronger response for firms with more than one business establishment and large firms, thereby providing evidence of tax planning opportunities (multi-establishment firms) and relatively low tax planning costs (large firms) enhancing the effect of bonus depreciation on investment. There is only week evidence of financial reporting costs (accounting incentives) moderating the tax induced effect on firms' real investment choices.
    Keywords: business taxation, user cost of capital, tax elasticity, real investment
    JEL: G11 H25 H32 M41
    Date: 2023
  4. By: Pierre-Richard Agénor; Luiz Awazu Pereira da Silva
    Abstract: A two-region endogenous growth model of the world economy with local and global public goods is used to study strategic interactions between national fiscal authorities. Distortionary levies are used to finance infrastructure investment at home and to generate resources that are transferred to a global public fund for the production of vaccines, which contribute to individual health in both regions. While the global public good is nonexcludable, it is partially rival - its distribution in each region is subject to congestion. Under financial autarky, the cooperative equilibrium is efficient because the benefits of vaccines are fully internalized. Under financial openness, the cooperative equilibrium is also efficient because it preserves the tax base by internalizing the cross-border leakages associated with capital flows. Similar results hold when the health levy takes the form of a wealth tax. However, optimal tax rates are not necessarily higher under cooperation---an important consideration from a policy perspective. Simple numerical experiments are performed to calculate the optimal rates and the gain from cooperation under alternative regimes.
    Keywords: global public goods, endogenous growth, fiscal policy coordination, optimal taxation
    JEL: F43 H51 H87
    Date: 2023–07
  5. By: McDonald, Tia M.; Durst, Ron L.
    Keywords: Community/Rural/Urban Development, Labor and Human Capital, Agricultural and Food Policy
    Date: 2023
  6. By: Anna Bernard; Rahim Lila; Joana Silva (Católica School of Business and Economics, Universidade Católica Portuguesa; Charles Rivers Associate; Católica School of Business and Economics, Universidade Católica Portuguesa)
    Abstract: R&D tax credits, by stimulating private sector innovation, can play a key role in promoting employment and firm performance. This paper examines the program impact on the trajectory of firms in terms of technology adoption, firm performance and workforce composition, and the extent to which it depends on the size of the targeted firms. It uses rich longitudinal micro-data on innovation, firms and their workers. Combining matching with a staggered adoption differences-in-differences, we show that tax credits increase investment in R&D-related activities while funds are being received, but not thereafter. Productivity and efficiency (but not employment) increase in large firms. These effects are driven by structural changes, both in terms of the increased share of skilled individuals within the firm (keeping the overall employment level constant) and enhanced technological adoption. In contrast, small firms mostly respond by increasing employment and production scale. Our results suggest that an important trade-off: R&D tax credit programs that target large firms are likely to lead to efficiency and productivity gains, but limited effects on employment of supported firms. In contrast, R&D tax credit programs that mostly benefit small firms may lead to employment gains in supported firms, but limited effects on structural changes in productivity and efficiency.
    Keywords: R&D tax credits, Innovation, SIFIDE, Matching, Differences-in-Differences
    JEL: O31 O38 H25
    Date: 2023–07
  7. By: Congressional Budget Office
    Abstract: If current laws governing taxes and spending generally remained unchanged, the federal budget deficit would increase significantly in relation to gross domestic product over the next 30 years, CBO projects. Those growing deficits are projected to drive up federal debt held by the public. In 2053, such debt would exceed any previously recorded level—and would be on track to increase further.
    JEL: E20 E60 E61 E62 E66 H50 H51 H53 H55 H60 H61 H62 H63 H68
    Date: 2023–06–28
  8. By: Marie-Noëlle Lefebvre (ESPI2R - Laboratoire ESPI2R Research in Real Estate [Paris] - ESPI - Ecole Supérieure des Professions Immobilières, CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas); Eddy Zanoutene (CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas)
    Abstract: This paper analyzes the responses of wealthy taxpayers to an important increase in dividend taxation in France in 2013. Using an exhaustive panel of French households liable for wealth taxation, we use a difference-indifference strategy to elicit responses of both incomes and wealth to changes in dividend taxation. Unsurprisingly we observe a decline in dividends payments due to the rise in dividend taxation. This drop is severe enough for the tax hike to actually result in a loss of government revenue. However, we show that this direct response of dividend to its own marginal tax rate is not sufficient to account for the total impact of the reform. Indeed, we document a significant increase in wealth in response to the tax hike on dividends, especially when we focus on financial wealth. This rise in taxable wealth mitigates the impact of the decline in dividends, although it does not completely offset the loss in government revenue.
    Keywords: Dividend taxation, Wealth Tax, Efficiency
    Date: 2022–03–29
  9. By: Tanner Regan (George Washington University); Priya Manwaring (University of Oxford)
    Abstract: Public disclosure of tax behavior is a promising policy tool for raising tax compliance in low-income countries with limited capacity for alternative enforcement mechanisms. Through a field experiment involving over 65, 000 taxpayers in Kampala, we study effects of reporting delinquents and recognizing compliers and provide evidence on the social determinants of tax compliance. The threat of publicly disclosing delinquency raises compliance, but subsequently disseminating delinquent behavior lowers compliance of others. Public recognition backfires, lowering compliance both for those promised recognition and for those who receive information about compliant taxpayers. These results are consistent with a model of tax evasion with privacy costs to tax eligibility status and limited shame of delinquency. Disseminating tax behavior reduces compliance by lowering compliance beliefs as measured in survey data. Overall, public disclosure policies in this context are limited at raising revenue and enforcement reminder nudges more effective.
    Keywords: property tax, tax morale, public disclosure, shaming
    JEL: O18 H30 H26
    Date: 2023–04

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