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on Public Finance |
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Issue of 2024‒06‒17
eleven papers chosen by |
| By: | José M. Domínguez; Carmen Molina; Ana Patricia Montes |
| Abstract: | The purpose of this paper is to analyse the tax proposal made in the United States for the taxation of billionaires, which introduces elements of the concept of income in the Schanz-Haig-Simons tradition. In particular, attention is paid to the tax treatment of unrealised capital gains, which marks an important difference between the different personal income tax models. The theoretical background is reviewed, the problems of its practical application are also addressed, and a quantitative comparison of the implications of recurrent and deferred taxation options is made. |
| Keywords: | personal income tax, billionaires tax, Haig-Simons model. |
| JEL: | H24 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03262024&r= |
| By: | Berenice Anne Neumann; Niklas Scheuer |
| Abstract: | We study the effect of bequests and their taxation on wealth inequality. We allow for random death and birth in a continuous-time, dynastic framework. Individuals behave optimally and accumulate wealth over their lifetime. Bequests above a tax exemption threshold are taxed according to a fixed rate. We derive a stochastic differential equation modeling dynastic wealth and obtain an analytical expression for the coefficient of variation. By calibrating our model to German wealth data, we utilize these analytical results to project empirical wealth inequality across various bequest tax rates and tax exemption thresholds. Most notably, our results indicate that a combination of a high tax exemption threshold paired with a high bequest tax rate reduces wealth inequality strongest when considering revenue-neutral alterations. |
| Keywords: | wealth, bequest, taxation, wealth inequality, analytical solution |
| JEL: | D31 E21 H24 |
| Date: | 2025 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:202405&r= |
| By: | Berliant, Marcus; Boyer, Pierre |
| Abstract: | This paper begins with a survey of the literature on the political economy approaches to labor income taxation. We focus on recent progress made by examining in detail the specific properties of non-linear taxes derived in the context of voting. Next, we present new results on the existence of majority voting equilibrium that unify work in the standard framework. Finally, we discuss how recent theoretical results help us uncover empirical patterns from the last 50 years in the US tax system, namely a sharp decrease in top marginal tax rates, the rise of the Earned Income Tax Credit (EITC), and increased progressivity in the middle of the income distribution. |
| Keywords: | Non-linear income taxation; Tax reform; Political economy; Optimal taxation; EITC |
| JEL: | C72 D72 D82 H21 |
| Date: | 2024–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120864&r= |
| By: | d'Andria, Diego |
| Abstract: | We study the relationship between tax progressivity and the size of the R&D workforce, using a panel of European countries in 2000-2019. We review the theoretical literature which provides opposing predictions about such a relationship. We then demonstrate that such relationship exists as a "within" effect, it is negative, meaning that a larger tax progressivity is associated with smaller shares of employment in R&D activities, and it remains statistically significant after performing a number of robustness tests. Differently to previous studies based on patenting inventors, we find no effect due to top tax rates on the size of R&D employment. |
| Keywords: | Tax progressivity; R&D; Labour force structure |
| JEL: | H24 J21 J24 O3 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120937&r= |
| By: | Hiroaki Ino (School of Economics, Kwansei Gakuin University); Toshihiro Matsumura (Institute of Social Science, The University of Tokyo) |
| Abstract: | This study examines the optimal combination of emission and fuel taxes for reducing greenhouse gas emissions in a monopoly market. Greenhouse gases are emitted during both production and consumption stages (life-cycle emissions). We show that when a producer selects fuel efficiency endogenously, an additional strictly positive fuel tax should be imposed even if an optimal emission tax is introduced. Remarkably, the unit cost of fuel should be larger than the marginal social cost of fuel. The results imply that a government may maintain fuel taxes even after introducing an effective emission tax. |
| Keywords: | fuel tax, emission tax, optimal taxation, carbon pricing, vehicle industry, fuel efficiency |
| JEL: | Q58 Q48 H23 L51 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:273&r= |
| By: | Christine L. Dobridge; Joanne W. Hsu; Mike Zabek |
| Abstract: | We estimate the effects of personal income tax decreases on financial well-being, including qualitative subjective assessments and quantitative measures. A plausibly causal design shows that tax decreases in the Tax Cuts and Jobs Act made survey respondents more likely to say they were "living comfortably" financially, with null effects at lower levels of subjective financial well-being. Estimates from a similar design using credit bureau data show that people who had larger tax decreases were modestly more likely to open new accounts, and more likely to have higher consumer credit balances. Tax decreases had effects on credit scores that are indistinguishable from zero. Results suggest that larger tax decreases improve financial well-being in ways not fully proxied by typical administrative data. |
| Keywords: | Taxes; Subjective well-being; Household finances; Credit; Financial well-being |
| JEL: | H24 G50 I31 |
| Date: | 2024–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-29&r= |
| By: | Aude Pommeret (USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc); Antonin Pottier (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique, CMB - Centre Marc Bloch - MEAE - Ministère de l'Europe et des Affaires étrangères - Bundesministerium für Bildung und Forschung - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This note is concerned by the difference between production-based taxation and consumption-based taxation of CO2 emissions. We focus on the possible discrepancy between a carbon tax paid by the producer and a tax on the carbon content of the consumed good. We want to appraise if and how incentives from consumption-based taxation are pushed down the production chain. Depending on whether the producer takes as fixed the price he receives or the price paid by the consumer (price the producer receives plus the tax on carbon content), we have two different conclusions. This raises a puzzle: which price should be considered as fixed? We show that, if producers are rational, they should take the price paid by the consumer as given, not the price received by the producer. In this case, the tax on carbon content (consumption-based taxation) is equivalent to the standard carbon tax (production-based taxation). Our analysis stresses the importance of the producer's rationality, as well as the importance of differentiating taxation by the actual carbon content, specific to each producer. |
| Keywords: | Carbon tax, Tax on carbon content, Optimal taxation, Consumption-based policies, Energy transition |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ciredw:hal-04534079&r= |
| By: | Christoph Böhringer; Knut Einar Rosendahl; Halvor Briseid Storrøsten |
| Abstract: | Countries with ambitious climate targets are concerned about carbon leakage to countries with more lenient or no carbon pricing. A common policy measure against leakage is output-based allocation of emissions allowances, whose effectiveness could be further enhanced by consumption taxes levied on the carbon intensity of goods. We combine theoretical and numerical analysis to derive optimal combinations of output-based allocation and consumption taxes for different assumptions on the stringency of emissions reduction targets, the coverage of emissions in regulated sectors, and their trade exposure. A key analytical finding is that output-based allocation and consumption taxes are complements rather than substitutes, i.e., the extent of output-based allocation should be higher if combined with a consumption tax. A key numerical finding is that the optimal output-based allocation and consumption tax rates should be set at almost the same rate and increase substantially with the stringency of the emissions reduction targets. |
| Keywords: | carbon leakage, output-based allocation, consumption taxes |
| JEL: | D61 F18 H23 Q54 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11102&r= |
| By: | António Afonso; José Carlos Coelho |
| Abstract: | We assess the drivers of fiscal sustainability in 20 OECD economies between 1950 and 2019. We find stable long-term relationships between government revenues and expenditures as well as between the primary budget balance and past public debt ratio for the full panel. Performing an expanding window analysis, we conclude that the differential between the long-term real interest rate and the real GDP growth rate (r-g) plays a crucial role in fiscal sustainability, as well as the existence of fiscal rules in terms of the budget balance, and also the output gap. The effects of inflation, external accounts balance and fiscal rules on sustainability coefficients à la Hakkio and Rush (1991) and Bohn (1998) are heterogenous. Furthermore, before the global financial crisis of 2008, the effects of the (r-g) differential were particularly strong, and depended on its sign as well as on past debt-to-GDP ratios. |
| Keywords: | fiscal sustainability; primary budget balance; public debt; panel data; expanding window; fiscal rules. |
| JEL: | C23 H61 H63 E62 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp03252024&r= |
| By: | Philippe Aghion; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva |
| Abstract: | We use individual panel data and the introduction of simpler tax regimes for the self-employed in France to assess the extent to which individuals' shift towards the simpler tax regimes is driven by tax simplicity and by tax evasion motives. We find evidence of a quest for simplicity from estimating the amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes, and from observing that bunching is increasing in the degree of simplicity of the tax regime. We argue that tax evasion plays a significant role in explaining individuals' attraction towards simpler tax regimes. We develop a structural model to quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. The model suggests a considerable preference for tax simplicity, ranging from 162 to 5654 euros per year per self-employed individual, which in turn entails a sizeable evasion elasticity. |
| Keywords: | self-employment, taxation, entrepreneurship |
| Date: | 2024–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1999&r= |
| By: | Enea Baselgia; Isabel Z. Martínez |
| Abstract: | We use a novel rich-list data set to estimate the sensitivity of the location choice of superrich foreigners to a special tax regime, under which wealthy foreigners are taxed on their living expenses, rather than their true income and wealth. We are the first to evaluate this controversial Swiss policy, and show that when some Swiss cantons abolished this practice, their stock of super-rich foreigners dropped by 43% as a consequence. We find no response for the Swiss super-rich, who were unaffected by the policy change. |
| Keywords: | super-rich, location-choice, tax mobility, expenditure-based taxation, preferential taxation, tax competition |
| JEL: | H24 H71 H73 R23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11093&r= |