nep-pub 2026-02-16 papers

on Public Finance

Issue of 2026–02–16
two papers chosen by
Kwang Soo Cheong, Johns Hopkins University

Distortions for Nothing Optimal Taxation of (Un)Distributed Profits By Etienne Lehmann; Eddy Zanoutene
The Redistributive Effects of Federal Medicaid Outlays Across Counties: Evidence from the ACA By Laura Montenovo; Kosali I. Simon; Coady Wing

Distortions for Nothing Optimal Taxation of (Un)Distributed Profits

By:	Etienne Lehmann; Eddy Zanoutene (CY Cergy Paris Université, THEMA)
Abstract:	We study the optimal taxation of corporate and dividend income when entrepreneurs can use retained earnings to reduce their tax burden. We show that eliminating dividend taxes while increasing the corporate income tax (CIT) to keep investment unchanged raises total tax revenue. Our simulations suggest net revenue gains of 0.1-0.4% of GDP. In an infinite-horizon model, the optimal policy sets dividend taxes to zero in every period. As the discount factor approaches one and when the planner values only workers’ welfare, the optimal steady-state CIT converges to a standard inverseelasticity rule.
Keywords:	Corporate Tax, Dividend Tax, Optimal Taxation, Capital Taxation
JEL:	H21 H24 H25 H26 H32
Date:	2026
URL:	https://d.repec.org/n?u=RePEc:ema:worpap:2026-02

The Redistributive Effects of Federal Medicaid Outlays Across Counties: Evidence from the ACA

By:	Laura Montenovo; Kosali I. Simon; Coady Wing
Abstract:	We examine how Medicaid expansion under the Affordable Care Act reshaped federal transfer inflows to counties using state Medicaid expansions between 2014 and 2017. We show that the ACA expansion increased federal Medicaid transfers by $361 per capita in expansion counties. Using our estimates, we forecast that non-expansion counties would gain $554 per capita if they expanded Medicaid. These transfers flow to counties with lower tax capacity and lower gross income. Our findings suggest that Medicaid expansion was a health policy intervention that also functioned as a budgetary mechanism reshaping federal to local transfers and fiscal smoothing across U.S. counties.
JEL:	H10 H20 H27 I13
Date:	2026–01
URL:	https://d.repec.org/n?u=RePEc:nbr:nberwo:34758

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