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on Public Finance |
| By: | Alan J. Auerbach; William Gale |
| Abstract: | It is well-understood that the U.S. faces an unsustainable fiscal future. We review historical budget trends and basic fiscal processes. We provide new estimates of the budget outlook, incorporating the recently enacted One Big Beautiful Bill Act (OBBBA), and finding that the debt-GDP ratio will rise to 183% in 2054 under the OBBBA as legislated and to 199% if the temporary tax and spending provisions are made permanent. These figures compare to a current debt-GDP ratio of about 100% and a pre-OBBBA CBO analysis earlier this year that projected the 2054 debt-GDP ratio to be 154%. We estimate a fiscal gap – the permanent tax or spending changes needed to keep the 2054 debt-GDP ratio at its current level – to be about 3.4% of GDP if OBBBA is extended. We discuss the economic and political ramifications of debt and different ways to address the fiscal situation. |
| JEL: | H6 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34455 |
| By: | Guttorm Schjelderup; Floris Zoutman |
| Abstract: | This paper analyzes how a wealth tax affects investor portfolio choice when a realization-based capital gains tax is present. We develop a two-period model with heterogeneous investors and show that while a capital gains tax distorts portfolio choice by encouraging investors to postpone realization, a wealth tax can eliminate this distortion and enhance efficient portfolio choice. Our optimal-tax model balances the equity gains from both taxes against efficiency losses related to intertemporal and portfolio choice. We use the model to derive an elasticity-based criterion for empirically evaluating the desirability of a wealth tax. |
| Keywords: | wealth tax, capital-gains tax, dividend tax, lock-in effect, capital-market efficiency |
| JEL: | H24 D14 G51 H21 M21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12254 |
| By: | Alex Yeandle |
| Abstract: | The digitalization of low-income economies has made it easier for governments to collect tax, yet many still fail to raise adequate revenues. Why would policy makers in urgent need of resources not fully leverage these new tools? I argue that governments remain constrained by public opinion: digital taxes are perceived as unfair, unaccountable, and lacking tangible benefit among the large groups of voters they affect. As a result public support for digital taxes depends heavily on how they are designed. |
| Keywords: | Taxation, Fiscal policy, Low income countries, Mobile phones |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2025-81 |
| By: | José María Durán-Cabré (Universitat de Barcelona & IEB); Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Christos Kotsogiannis (Tax Administration Research Centre (TARC), University of Exeter Business School & CESIfo); Luca Salvadori (Universitat Autònoma de Barcelona & BSE & IEB & Tax Administration Research Centre (TARC), University of Exeter Business School) |
| Abstract: | Enforcing wealth tax compliance among high-net-worth individuals is particularly challenging. Using administrative data on the Net Wealth Tax for Catalan taxpayers over the 2011–2020 period, this paper evaluates the impact of audits on voluntary compliance. The evidence suggests that wealth tax audits do enhance compliance, but the impact is short-lived — and driven by taxpayers rebalancing their tax evasion and avoidance responses. On the institutional side, the results indicate that Spain’s overlapping tax audit mandates can create coordination frictions that reduce the efficiency and effectiveness of audit-based enforcement of the New Wealth Tax. Effective enforcement depends not only on robust audit strategies, but also on coherent institutional design and sound tax policy. |
| Keywords: | Tax Audit Evaluation; Overlapping Tax Audit Mandates; Wealth Tax; Tax Evasion; Tax Compliance |
| JEL: | H26 D31 O17 D02 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ieb:wpaper:doc2025-15 |
| By: | Colin Davis (The Institute for the Liberal Arts, Doshisha University, JAPAN); Laixun Zhao (Research Institute for Economics and Business Administration, Kobe University, JAPAN) |
| Abstract: | We study how tax and transfer policies affect economic growth and income inequality in a framework in which growth, market structure and time preferences are all endogenously determined. Firm-level investment in product quality drives economic growth, creating a demand for household savings to finance both market entry and in-house R&D. By distinguishing between affluent households that invest in financial assets and poor households that live hand-to-mouth, and linking the former's savings to an endogenously determined discount rate, we derive the conditions for a stable balanced growth path. We then explore the effects of taxing the wage income and asset income of affluent households, while redistributing the proceeds to poor households, and find that diminishing marginal impatience introduces a new channel where both higher growth and lower inequality can be achieved, through tax policies that influence market concentration. |
| Keywords: | Endogenous time preferences; Diminishing marginal impatience; Endogenous quality growth; Wage income taxes; Interest income taxes |
| JEL: | E00 O31 O41 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-27 |
| By: | Santiago Afonso; Sebastian Galiani |
| Abstract: | This paper examines the motives, constraints, and sequencing behind Argentina’s 2017 tax reform, drawing on the authors’ direct involvement in its design and implementation. We document how a large inherited fiscal imbalance, a disinflation program that mechanically raised real pension spending under the pre-existing indexation rule, minority status in Congress, and limited administrative capacity jointly narrowed the feasible policy set. Within those constraints, the reform aimed to be near-revenue-neutral while rebalancing the system toward investment and employment: phasing down corporate rates with dividend taxation and inflation adjustment, reducing the labor wedge at the bottom via a per-worker deduction, rationalizing VAT and excises (including carbon and health-motivated taxes), and coordinating with provinces to cap and de-cascade the turnover tax (ISIB) through a Fiscal Consensus. We trace how coalition politics and sectoral vetoes reshaped the package, why forward guidance and escape clauses were embedded ex ante, and how the 2018 sudden stop, followed by policy reversals, limited the reform’s realized growth dividend. We draw four lessons: credibility is a fiscal instrument; provincial coordination beats technocratic perfection; discretionary levers invite rent-seeking; and targeting informality and compliance margins yields higher returns than blunt rate changes. The analysis offers a pragmatic template for tax reform under macroeconomic fragility, federal fragmentation, and state-capacity constraints. |
| JEL: | H2 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34442 |