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on Public Finance |
| By: | Nakatani, Ryota; Miyamoto, Hiroaki |
| Abstract: | This paper studies the optimal tax-and-transfer policy when automation raises productivity but displaces unskilled workers. Using a general equilibrium model calibrated to the U.S. economy, we compute the steady-state social welfare-maximizing rate of each of four tax instruments: capital income taxation, unskilled wage taxation, taxation on automation capital (i.e., a robot tax), and consumption taxation. Following an increase in the productivity of automation-related capital, the welfare-maximizing capital income tax rate and robot tax rate are zero, as their long-run investment distortions outweigh their redistributive social benefits. In the baseline simulation, aggregate welfare is maximized by cutting the unskilled wage tax rate and, especially, the consumption tax rate. However, when unskilled labor and automation-related capital are highly substitutable, the optimal consumption tax rate increases, and the additional government revenue is redistributed to displaced unskilled workers. |
| Keywords: | Automation; Optimal Taxation; Capital Income Tax; Labor Income Tax; Consumption Tax; Robot Tax |
| JEL: | C68 E25 H21 H24 H25 O31 O40 |
| Date: | 2026–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128480 |
| By: | Eric Gao; Daniel Luo |
| Abstract: | We study economies where consumers interact independently with many monopolists. When consumer valuations over goods are correlated, correlation can distort the induced distribution of consumer surplus (information rents). We identify which shifts in the correlation structure over values makes the induced distribution more or less fair, in the sense of second order stochastic dominance. We then investigate the role taxation can have on information rents, and show the tax authority never benefits from randomizing the allocation of goods. We characterize the set of mechanisms that are on the fairness-efficiency frontier under regularity conditions on the distribution of types. Furthermore, under these conditions all allocations on the fairness-efficiency frontier ration the good more than an unregulated monopolist. Finally, we discuss implications of our model for luxury commodity taxation. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.19044 |
| By: | Brun Lidia (European Commission - JRC); Stoehlker Daniel (European Commission - JRC); Pycroft Jonathan; Van't Riet Maarten |
| Abstract: | We assess the welfare implications of the Global Minimum Tax (GMT) on corporate income in a multi-country macroeconomic model. The objectives of the GMT are to mitigate harmful tax competition and to curb wasteful profit shifting. The theoretical literature suggests that the welfare effects of the GMT are ambiguous. It contributes positively to welfare by improving tax revenues and limiting profit shifting; however, it may also raise firms' capital costs, which dampens economic activity. Using our applied model, we combine all these effects to produce numerical results, creating what we believe is the first comprehensive welfare assessment of the GMT. We simulate the implementation of a GMT of 15 percent by all countries in our model, which are the 27 EU Member States, the US, the UK, Japan, and a tax haven. We estimate the welfare change in two scenarios. In the first, additional corporate income tax (CIT) revenues are redistributed as direct transfers to households. This produces mixed welfare results across countries, while the global welfare impact is slightly positive. In the second, additional CIT revenues are redistributed back to firms as lower CIT rates, provided that the rate remains at or above the GMT rate. Positive welfare outcomes are widely, though not universally, experienced, leading to a modest increase in global welfare. We find these results are robust to non-participation of the US. Finally, we investigate the impact of alternative GMT rates, finding that a 16 percent GMT rate yields the highest level of global welfare in our model. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202504-02 |
| By: | Nicolay, Katharina; Spix, Julia; Steinbrenner, Daniela |
| Abstract: | We conduct a data-based policy evaluation of the first large-scale, EU-wide excess profit tax, implemented during the 2022 European energy crisis to tax the windfall profits of inframarginal electricity producers. In particular, we evaluate the inherent trade-off of excess profit taxation: the benefits from generating additional tax revenues for crisis mitigation versus the costs of potential distortions to production and investment decisions. On tax revenues, our analysis indicates that the inframarginal revenue cap could cover almost one quarter of the crisis-related government support, although the distribution of tax revenues and thereby the cost coverage is highly uneven across EU Member States. On distortions, we distinguish between impact on long-run investment and short-run production decisions. While we find only a limited negative impact on profitability, which could discourage investment in the long run, we find, using a difference-in-differences design, that electricity producers slightly adapt their short-run production decisions to improve their profitability. Our conclusions help to guide policymakers in future supply shocks. Excess profit taxes only provide a beneficial cost-benefit perspective under specific conditions. Policymakers must carefully time the implementation and accurately identify excess profits. Even with a generous definition of profits, excess profit taxes can be distortionary and, hence, fail to be pure windfall taxes. While retroactive implementation could be an avenue to enhance the cost-benefit profile of excess profit taxes as a crisis measure, it may undermine the credibility and predictability of the tax framework. |
| Keywords: | Excess profit taxes, windfall profit taxes, inframarginal revenue cap, European electricity crisis, non-distortionary taxation, real effects of taxation |
| JEL: | H21 H23 H32 H12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:340104 |
| By: | Eiji Yamamura; Fumio Ohtake |
| Abstract: | This paper examines the extent to which individual time preferences are associated with the willingness to accept different tax burdens. The first is an intertemporal redistribution in which a current consumption tax increase is exchanged for a proportional future reduction. The second is a contemporaneous redistribution where the tax burden borne by individuals is transferred directly to those with significantly lower incomes than their own. Using a cross-sectional online survey of approximately 12, 000 observations, we found through various regression analyses that higher time preference is negatively associated with acceptance in both domains. Crucially, the negative coefficient is larger in absolute value for contemporaneous redistribution than for the intertemporal one. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.15349 |
| By: | Adam M. Lavecchia; Robert McKercher; Alisa Tazhitdinova |
| Abstract: | This paper estimates the causal effect of income taxation on inter-provincial migration in Canada. We exploit a major tax decentralization reform between 1998-2001 that led to some provinces lowering their marginal and average tax rates more than others, particularly for top earners. Using a difference-in-differences design, we estimate a population stock-elasticity with respect to the net-of-average-tax rate of about 2.5-3 for young, unmarried high-income individuals. The estimates for older and married individuals are smaller and mostly statistically insignificant. We find that the population stock elasticity estimates are driven by a reduction the likelihood that young, unmarried and high-income individuals emigrate from their province of residence (i.e. out-migration) rather than a change to in-migration. This suggests that individuals react more strongly to tax changes in their home province rather than tax changes in other provinces. |
| Keywords: | migration; taxation; within-country mobility |
| JEL: | H2 H21 H24 H26 H71 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2026-03 |
| By: | Maier Sofia (European Commission - JRC); De Poli Silvia; Klenert David (European Commission - JRC); Amores Antonio F (European Commission - JRC); Dreoni Ilda (European Commission - JRC) |
| Abstract: | This article introduces Green EUROMOD, the environmental extension of the EU’s tax-benefit microsimulation model EUROMOD. It provides a novel framework for evaluating the distributional, environmental, and fiscal impacts of green policy reforms across the 27 EU Member States. The model captures both direct greenhouse gas (GHG) emissions - such as those arising from household fuel combustion for heating and private transport - as well as indirect emissions occurring along value chains. Indirect emissions are further disaggregated into those embodied in domestically produced goods and services, and those embodied in imports from other EU Member States and the rest of the world. This granularity, combined with the capacity to simulate environmental and tax-benefit policies jointly and consistently across countries, makes Green EUROMOD a unique tool for the design and assessment of environmental policy reforms, with a particular focus on their distributional effects. The article outlines the model’s components and methodological framework, followed by a demonstration of its capabilities through two applications. First, we present the estimated household carbon footprints from consumption across the income and GHGemissions distribution, for the 27 EU countries. Second, we assess the extent to which GHG emissions are already implicitly priced by existing value-added and excise taxes. This provides new policy insights regarding the current baseline which future carbon pricing policies need to consider, as well as the relative performance of Member States in balancing green and fair objectives with their current consumption tax structures. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202604 |
| By: | Cruces Hugo (European Commission - JRC); Bornukova Kateryna (European Commission - JRC); Hernandez Adrian; Picos Fidel (European Commission - JRC) |
| Abstract: | Spain’s child at-risk-of-poverty rate stands around 29%, among the highest in the EU, and substantially higher than the overall population rate of 19%. The existing cash child support system in Spain fails to reach poor families: it is centered on a non-refundable child tax credit (“mínimo por descendientes”) that provides higher support per child to higher-income households, leaving as many as 60% of children in poverty without this tax relief. Making the child tax credit refundable or implementing a Universal Child Benefit would fill the gaps of the current system, outperforming the status quo in terms of poverty reduction at the same budgetary cost. More ambitiously, reducing Spain’s child poverty to the EU average would cost about 1.3% of GDP yearly, still well below existing estimates of the costs associated with childhood disadvantage (4-5% GDP). |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc146328 |
| By: | Shahir Adnan; Ferrari Emanuele (European Commission - JRC) |
| Abstract: | This study evaluates the macroeconomic, environmental, and distributional effects of introducing a US$20 per tome 〖CO〗_2 tax on fossil fuels in Ethiopia. We employ a top-down macro–micro framework that links the DEMETRA computable general equilibrium model with the ETMOD tax–benefit microsimulation system to evaluate alternative revenue-recycling strategies, income-tax reductions, sales-tax cuts, and lump-sum transfers to households. The carbon tax reduces fossil-fuel emissions by 5.89% while causing a modest GDP decline of 0.17%, with carbon-intensive sectors, particularly transport and water, experiencing the largest contractions. Revenue recycling strongly influences outcomes: sales-tax reductions minimize GDP losses and are the only strategy that lowers poverty. The carbon tax would be regressive, but recycling its revenues makes it progressive, with sales-tax reductions yielding the greatest equity gains. The findings indicate that a carefully designed carbon tax, accompanied by an effective revenue-recycling strategy, can facilitate Ethiopia’s low-carbon transition, promote equitable outcomes, and safeguard vulnerable households. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:eapoaf:202603 |