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on Public Finance |
| By: | David R. Agrawal; James M. Poterba; Owen M. Zidar |
| Abstract: | This paper catalogues policies that have been deployed by jurisdictions seeking to mitigate the effects of tax competition. There are many instruments in this policy arsenal, since the tax base associated with a particular tax instrument may be affected by multiple policy choices, including some such as capital controls and development incentives that are outside the traditional realm of tax policy. This paper describes sixteen instruments that both federal and sub-federal governments have adopted in an effort to limit tax competition. It classifies them into three groups: those that can be pursued unilaterally, those that require bilateral or multilateral agreement, and those that require action by an external actor such as an overarching government. It also discusses the set of economic responses that are relevant to the evaluation of these policies, and then summarizes new evidence on the impact of a subset of these policy instruments in the United States and several other nations. |
| JEL: | H2 H3 H73 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32090&r=pub |
| By: | Agersnap, Ole (Yeh College, Princeton University); Bjørkheim, Julie Brun (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | Most tax systems around the world are highly complex. While several economists have studied the potential costs associated with tax complexity, few have explored if complexity can also have beneficial effects. In a novel model where taxpayers can acquire costly knowledge to reduce their tax burden, we show that when elasticities of taxable income are heterogeneous, a complex tax system can act as a sorting device similar to second-degree price discrimination, where more elastic taxpayers will invest in more tax knowledge. We prove that if elasticities are increasing with income, introducing tax complexity can allow the government to raise higher tax revenues at no efficiency cost. However, we show that complexity primarily benefits the highest earners and thus exacerbates inequality. In the empirical section of our work, we study a complex tax system in Norway. Using rich register data on business owners, we demonstrate that many taxpayers make accounting decisions that cause them to pay higher taxes than would have been possible, and we quantify the exact size of this tax overpayment at the individual level. We show that overpayment tends to be larger for women, the less wealthy, and immigrants. We validate our model predictions by showing that failure to optimize is associated with a lower estimated tax elasticity. |
| Keywords: | Taxation; Personal Income Taxes; Fiscal Policies and Behavior of Economic Agents: Household; Tax Evasion and Avoidance |
| JEL: | H20 H24 H26 H31 |
| Date: | 2024–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2024_004&r=pub |
| By: | Seiyoun Kim; Vjollca Sadiraj; Yongsheng Xu |
| Abstract: | We conduct a laboratory experiment to study individual decision on donating to a charity in response to changes in the tax rate and income in the presence of matching and two types of rebate subsidies: deterministic and stochastic. Private consumption is taxed, and contributions are subsidized in a way that preserves the relative price of giving across the fundraising mechanisms. We find that tax framing and rebate subsidy elicit less charitable contribution than neutral framing and matching subsidy; the negative effect on donation is smaller for stochastic than deterministic rebate subsidies. Data suggest that charitable giving is a normal good and that donations and private consumption are complements. |
| Keywords: | charitable giving, tax deduction, rebate subsidy, matching subsidy, experiments |
| JEL: | H41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2023-01&r=pub |
| By: | Boeri, Tito Michele; Gamalerio, Matteo; Morelli, Massimo; Negri, Margherita |
| Abstract: | We study whether a better knowledge of the functioning of pay-as-you-go pension systems and recent demographic trends in the hosting country affects natives' attitudes towards immigration. In two online experiments in Italy and Spain, we randomly treated participants with a video explaining how, in pay-as-you-go pension systems, the payment of current pensions depends on the contributions paid by current workers. The video also explains that the ratio between the number of pensioners and the number of workers in their countries will grow substantially in the future. We find that the treatment improves participants' knowledge about how a pay-as-you-go system works and the future demographic trends in their country. However, we find that only treated participants who support non-populist parties display more positive attitudes towards migrants, even though the treatment increases knowledge of pension systems and demographic trends for all participants. |
| Keywords: | information provision; experiment; immigration; pay-as-you-go pension systems; population ageing; populism |
| JEL: | C90 D83 H55 J15 F22 |
| Date: | 2023–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121343&r=pub |
| By: | Nicolas HÉRAULT; Stephen P. JENKINS |
| Abstract: | We decompose the redistributive effect of direct taxes into vertical, horizontal, and reranking components applying the methods of Urban and Lambert (Public Finance Review, 2008). In the first such application to the UK, and using yearly data covering 1977–2020, we find that redistributive effect increased over the period. However, there is no clear trend in horizontal inequity and this component forms a very small fraction of total redistributive effect by comparison with reranking and especially vertical components. It is also the vertical component that best tracks trends in redistributive effect. We give specific attention to the choice of the bandwidth used to define ‘close equals’ in terms of pre-tax income. We also show that implausible estimates of the horizontal inequity component arise for some years regardless of bandwidth used. |
| Keywords: | Redistributive effect; redistribution; horizontal inequity; reranking; Urban-Lambert decomposition; income tax |
| JEL: | D31 H24 H50 I38 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2023-11&r=pub |