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on Public Finance |
| By: | Anna Esslinger; Katharina Pfeil; Lars P. Feld |
| Abstract: | Are the effects of tax aversion on labor supply symmetric? In a real-effort online experiment, participants are exposed to manipulated wages and taxes after first experiencing the same reference wage. More participants change their labor supply when encountering a tax increase than when experiencing an equivalent wage decrease. However, there is no significant difference in labor supply change between the groups that received tax decreases and wage increases. Tax averse behavior existing only in the presence of net wage decreases implies asymmetric labor supply responses to taxation. |
| Keywords: | tax aversion, loss aversion, labor supply asymmetry, online experiment |
| JEL: | H20 H30 D91 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11317 |
| By: | Berman, Yonatan (King's College London); Klor, Esteban F. (Hebrew University, Jerusalem) |
| Abstract: | This paper studies the effects of capital tax reforms on retained earnings, dividend tax revenues, and income inequality in Israel between 2001 and 2020. We analyze two major dividend tax reforms: a permanent rate increase in 2012 and a temporary tax relief in 2017. By combining administrative income tax data, household surveys, and national accounts, we find that both permanent and temporary capital tax changes substantially affect retained earnings. The five percentage points increase in the dividend tax rate resulted in an immediate increase of over 100% in the withdrawal of retained earnings and in dividend tax revenues. While the permanent tax increase did not cause a long-term change in retained earnings withdrawals, the temporary tax relief triggered a significant increase in retained earnings after the relief period ended. Using these reforms, we improve the measurement of income inequality by directly observing the distribution of retained earnings. We find stable levels of income inequality in Israel after 2007, with a top 10% income share of around 48%, a high level by international standards. |
| Keywords: | capital tax reform, income inequality, retained earnings |
| JEL: | D3 H2 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17373 |
| By: | Asen Ivanov (Queen Mary University of London, School of Economics and Finance) |
| Abstract: | I investigate numerically the following question: Given that individuals with different wages disagree over the optimal labour-income tax schedule, how would such disagreements be affected if society restricted itself to using linear tax schedules? I find that there would be (i) a decrease in disagreements within a large segment of the population at the top of the wage distribution, (ii) a sharp decrease in how much a very-high-wage individual disagrees with individuals whose wage is weakly above the median but sufficiently far below her wage, (iii) a sharp decrease in how much a zero-wage individual disagrees with a median-wage individual, and (iv) a decrease in how much a zero-wage individual disagrees with high-wage individuals. |
| Keywords: | labour-income tax; linear tax; redistribution; conflict |
| JEL: | D70 D72 D74 H20 |
| Date: | 2024–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:qmw:qmwecw:984 |
| By: | Michael P Keane (Institute for Fiscal Studies); Xiangling Liu (University of New South Wales) |
| Date: | 2024–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:ifs:ifsewp:24/48 |
| By: | Lennard Schlattmann (University of Bonn) |
| Abstract: | Policies to mitigate climate change are high on the political agenda and their distributional consequences are actively discussed. This paper makes two contributions to this discussion. First, it empirically identifies the spatial dimension between rural and urban households as important for the distributional consequences of carbon taxes, because the average annual carbon footprint of rural households in Germany is 2.2 tons higher than that of urban households, around 12 percent of the average carbon footprint. Second, it builds a quantitative spatial general equilibrium model to evaluate different policies of recycling carbon tax revenues in terms of their redistributive effects and their political support along the transition to clean technologies. I find that recycling carbon tax revenues as lump-sum transfers redistributes from rural to urban households. For a carbon tax of 300 Euros per ton, the difference in the present value of net transfers is 8, 000 Euros. In contrast, place-based transfers avoid this spatial redistribution without reducing the speed of the transition to clean technologies. This has important implications for the political support for these policies, as place-based transfers allow to set a higher carbon tax under the constraint that the policy is beneficial to a majority of households in both regions. Finally, carbon taxes have sizeable general equilibrium effects on housing prices, increasing those of non-emitting houses by 5 percent, while decreasing those of carbon emitting houses by the same amount. |
| Keywords: | Climate change, Inequality, Tax and Transfer policies, Spatial Economics |
| JEL: | E21 H23 Q52 R13 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:345 |
| By: | Laurence O'Brien (Institute for Fiscal Studies) |
| Date: | 2024–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:ifs:ifsewp:24/45 |
| By: | Matías Strehl Pessina (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Marcelo Bérgolo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Martín Leites (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía) |
| Abstract: | Do top-income individuals support different levels of redistribution compared to the rest of society? If so, what drives these differences? We address these questions using a novel dataset combining administrative tax records with unique survey data on the social and economic preferences of workers in Uruguay. We document a marked decline in support for redistribution among the Top 1% of the income distribution. By comparing this group to the Top 50-2%, we show that differences in redistribution support are not solely explained by income or demographics. A set of beliefs, perceptions, and views, including political ideology, meritocratic beliefs, and views on government, account for much of the observed differences. Instead, a set of behavioral traits and social preferences, such as altruism and risk aversion, measured through incentivized online games, contribute little to explaining the gap. Finally, the differences in support for redistribution persist even when comparing the Top 1% with other high-income groups. Together, these findings suggest that the Top 1% is a distinct group with preferences for redistribution that differ from the rest of society, even from other high-income groups |
| Keywords: | Top-income individuals, Perceptions, Behavioral traits, Preferences for redistribution, Beliefs, Social preferences |
| JEL: | D31 D63 D91 H20 H30 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ulr:wpaper:dt-13-24 |
| By: | Burgstaller, Lilith; Pfeil, Katharina |
| Abstract: | Does whistleblowing deter rule violations when such violations are believed to be common? We examine this question in an online experiment about collaborative tax evasion. We vary whether subjects can blow the whistle on their partner in crime and introduce a high-evasion environment by framing the social norm such that evasion is expected to be common. Our findings show that giving partners in crime the option to blow the whistle on their partner does not significantly deter collaborative tax evasion. Collaborative tax evasion significantly increases in a high-evasion environment compared to an unspecified norm environment, even when whistleblowing is possible. This finding underlines that the norm environment is crucial for evasion and corroborates that whistleblowing is ineffective when both partners benefit from collaborative evasion. We offer several explanations for these findings. |
| Keywords: | Collaborative Tax Evasion, Social Norm, Peer Reporting, Whistleblowing, Online Experiment |
| JEL: | H26 E26 O17 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:aluord:305289 |
| By: | Michele Gubello; Nora Strecker |
| Abstract: | This paper studies the effect of income tax progressivity on the disproportionate use of publicly funded higher education. We show that more progressive tax systems increase low-income households’ net fiscal benefit of higher education, making their children more likely to attend university. To increase the university enrollment of children from low-income households, the “degree” of income tax progressivity must increase along the income distribution. “Weakly progressive” tax systems can determine a perverse redistribution equilibrium, in which poorer households subsidize the higher education for richer households. |
| JEL: | I23 H41 H31 H24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:lis:liswps:889 |