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on Public Finance |
| By: | Le Barbanchon, Thomas (Bocconi University) |
| Abstract: | This paper tests whether partially unemployed workers value future preserved benefits when they bunch at the kink of the unemployment insurance benefit-withdrawal schedule. I extend the bunching formula of Saez (2010) to a dynamic setting that accounts for the value of future benefits tied to taxation. This yields new tests of tax-benefit linkage based on bunching heterogeneity. I verify in quasi-experiments that UI extension programs that decrease the value of future benefits lead to more bunching and to lower labor supply. Last, a quantification exercise of the dynamic bunching formula provides extra support for a strong tax-benefit linkage. |
| Keywords: | tax-benefit linkage, bunching, unemployment insurance |
| JEL: | J65 H24 H31 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17600 |
| By: | Gopi Shah Goda |
| Abstract: | The U.S. tax code partially subsidizes out-of-pocket medical spending as itemized medical deductions (IMDs). In this paper, using detailed information in the Health and Retirement Study, I find that while a substantial share of medical spending among older Americans is deducted through the tax code, take-up is incomplete: 61.8 (50.5) percent of potential tax savings (deductions) are claimed, resulting in lost tax savings of $5.4 billion annually. Further, frictions in take-up result in diverting tax savings from higher-need populations. I investigate potential mechanisms and estimate a discrete choice model to simulate eligibility, take-up and the implied cost of claiming under different policy counterfactuals. The results indicate that subsidizing medical expenses through the tax code imposes significant economic burdens, reducing the net subsidy available to taxpayers. |
| JEL: | H51 I13 J14 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33213 |
| By: | Mirjam Bachli (HEC University of Lausanne); Albrecht Glitz (Universitat Pompeu Fabra) |
| Abstract: | Immigration may affect income inequality not only by changing factor prices but also by inducing policy makers to adjust the prevailing income tax system. We assess the relative importance of these economic and political channels using administrative data from Switzerland where local authorities have a high degree of tax autonomy. We show that immigrant inflows not only raise gross earnings inequality but also reduce the progressivity of local income taxes, further increasing after-tax inequality. Our estimates suggest that 10 percent of the impact of immigration on the net interquartile and interdecile earnings gaps can be attributed to the political channel. |
| Keywords: | Immigration, Income Taxes, Earnings Inequality |
| JEL: | H23 H24 H71 J31 J61 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2435 |
| By: | Erlend Eide Bø; Odd Erik Nygård; Thor Olav Thoresen (Statistics Norway) |
| Abstract: | Different types of taxation include the market value of housing or housing returns in their tax base, making it essential to obtain accurate and up-to-date assessments of property values. However, to value residential property represents a major challenge for tax administrations due to informational constraints. In the present paper we present and discuss a simple, inexpensive, and transparent procedure for assigning market value to each dwelling in Norway, based on deriving estimates from hedonic regressions. The valuations are updated yearly to reflect changes in market value. This is a novel example of using predictions obtained from regression estimates to define full-scale housing values for tax purpose. We present and discuss two iterations of the method: the initial prediction model introduced in 2010 and a refined version that would offer substantial improvements without the need for additional data collection efforts. |
| Keywords: | Taxation of housing; Hedonic regression; Housing valuation |
| JEL: | C51 D31 H61 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ssb:dispap:1019 |
| By: | Tao Sun |
| Abstract: | This paper proposes a Bayesian factor-augmented bundle choice model to estimate joint consumption as well as the substitutability and complementarity of multiple goods in the presence of endogenous regressors. The model extends the two primary treatments of endogeneity in existing bundle choice models: (1) endogenous market-level prices and (2) time-invariant unobserved individual heterogeneity. A Bayesian sparse factor approach is employed to capture high-dimensional error correlations that induce taste correlation and endogeneity. Time-varying factor loadings allow for more general individual-level and time-varying heterogeneity and endogeneity, while the sparsity induced by the shrinkage prior on loadings balances flexibility with parsimony. Applied to a soda tax in the context of complementarities, the new approach captures broader effects of the tax that were previously overlooked. Results suggest that a soda tax could yield additional health benefits by marginally decreasing the consumption of salty snacks along with sugary drinks, extending the health benefits beyond the reduction in sugar consumption alone. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.05794 |
| By: | Gopi Shah Goda; Ithai Lurie; Priyanka S. Parikh; Chelsea Swete |
| Abstract: | Approximately $76 billion in out-of-pocket medical spending was deducted as an itemized medical deduction (IMD) in 2021, resulting in about $9 billion in federal forgone tax revenue. We use data from U.S. tax returns to examine how these tax savings are distributed across income and age, how the distributions differ from the mortgage interest deduction, and how the distributions changed with the 2017 Tax Cuts and Jobs Act. While a given level of medical spending is less likely to be above the income threshold for higher-income households, itemization rates and marginal tax rates increase with income, resulting in tax savings skewed towards higher-income taxpayers: 94 percent of the tax savings accrue to those in the top half of the income distribution. The tax savings are also highly concentrated at older ages, with 42 percent accruing to those over age 65. Using rich survey data on out-of-pocket medical spending, we illustrate how the distribution of tax savings varies across policy alternatives. We find that expanding eligibility for the tax subsidy would likely reduce the concentration of tax savings at higher incomes and increase the concentration of tax benefits at older ages. |
| JEL: | H22 I18 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33157 |