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on Public Finance |
| By: | Duha T. Altindag; Reem El Cheikh Taha; John M. Nunley; R. Alan Seals |
| Abstract: | Automation affects public budgets through wages and the tax base, and also through inflows into social insurance. We estimate the effect of industrial robot exposure on Social Security Disability Insurance (SSDI) applications using confidential commuting-zone data and a shift-share design that instruments U.S. exposure with earlier European robot diffusion. One additional robot per 1, 000 workers lowers applications by about 8 per 100, 000 working-age residents, with the largest declines among workers aged 55 to 64. Employment-to-population ratios do not fall in exposed commuting zones, which weighs against broad local displacement as the sole explanation. A year's flow of averted applications corresponds to about \$3.4 billion in expected SSDI and Medicare obligations, or about \$17, 000 per robot-year, in present value rather than realized cash. Displacement adds to social-insurance costs, whereas robot exposure here reduces them, an offset that assessments built only on displacement leave unpriced. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.02892 |
| By: | Karen Dynan; Douglas Elmendorf; Louise Sheiner |
| Abstract: | Artificial intelligence will probably generate major changes in the US economy, although the nature, timing, and magnitude of those changes are highly uncertain. We analyze a set of long-term scenarios involving different combinations of faster productivity growth, greater income inequality, job displacement, and a higher capital share of income. For each scenario, we assess the implications for federal debt and potential policy responses related to faster economic growth, the distribution of income, support for workers who are laid off, and taxation and ownership of capital. Given the uncertainty surrounding AI’s economic effects, policies that are robust to different scenarios would be especially valuable. |
| JEL: | E62 H20 H60 H68 J24 O30 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35437 |
| By: | Gehrsitz, Markus (University of Strathclyde); Traxler, Christian (Hertie School) |
| Abstract: | This paper studies how vehicle taxation shapes fleet exit. We exploit Germany's 2008/9 circulation tax reform, which generated a sharp discontinuity in annual tax liabilities at a registration cutoff date. Using administrative micro-data covering the universe of registered vehicles during the second half of 2008, we apply a difference-in-discontinuities design to estimate the effect of annual circulation taxes on permanent deregistrations. A 10 percent higher tax increases the share of deregistered vehicles after six years by about 2.8 percent. Duration analyses exploiting within-model variation in taxes yield closely consistent estimates. The effect seems to be mainly driven by exports rather than vehicle retirement. |
| Keywords: | vehicle taxation, circulation tax, deregistrations, difference-in-discontinuities |
| JEL: | H23 R48 Q58 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18807 |
| By: | Jingnan Chen (Department of Economics, University of Exeter); Yixin Chen (Central University of Finance and Economics); Zhixin Dai (School of Finance, Renmin University of China); Tianqi Wei (China University of Political Science and Law); Su Yang (Renmin University of China) |
| Abstract: | Taxpayers rarely observe audit probabilities and must infer changes in enforcement from personal and social experience. We study this process in a laboratory tax-reporting experiment with 568 participants. Each participant faces hidden audit probabilities of 5 percent and 25 percent in randomized order, and we vary peer information across sessions from none to one or two preceding audit outcomes in a sparse network and three in a dense network. Before any peer outcome is transmitted, assignment to either network raises compliance by about 20% relative to no peer information. Once outcomes circulate, compliance in the dense network is approximately twice as responsive to enforcement as without peer information and about 60% more responsive than in the sparse network. This amplification is directional: relative to no peer information, the dense network raises compliance by about 12% after enforcement strengthens but lowers it by about 25% after enforcement weakens. Elicited belief distributions show that broader information reach improves learning about the changed enforcement environment. Higher perceived audit probabilities predict greater subsequent compliance, and the dense network's advantage comes from accumulating more peer signals rather than weighting each signal more heavily. Counterfactual policy exercises show that broader diffusion can reinforce deterrence under strong enforcement but erode it under weak enforcement; a model-based exercise suggests that full disclosure of the audit probability can reduce compliance under both weak and strong enforcement. |
| Keywords: | tax compliance, tax enforcement, social learning, information networks, subjective beliefs |
| JEL: | H26 D83 C91 |
| Date: | 2026–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:exe:wpaper:2610 |
| By: | Makarski, Krzysztof (FAME|GRAPE & Warsaw School of Economics); Tyrowicz, Joanna (FAME|GRAPE, University of Warsaw and IZA/LISER); Komada, Oliwia (FAME|GRAPE) |
| Abstract: | This paper studies the role for progressive labor income taxation in the context of social security reform. We propose a novel reform that replaces redistributive pensions with a contribution-based system while simultaneously increasing the progressivity of labor income taxation to preserve social insurance. Using a stylized model, we show that the benefit of such reform is derived from the Frisch elasticity of labor supply. For sufficiently high values, the reform can be fiscally neutral and Pareto-improving. We then evaluate the reform in a full general equilibrium model calibrated to the U.S. economy. Quantitative results on the efficiency-insurance trade-offs are in line with our theoretical predictions. In the steady-state, for plausible values of the Frisch elasticity, the fiscal space generated by increased labor supply is sufficient to compensate through lump-sum transfers the loss of pension-based insurance. These results carry over to transition dynamics: the reform yields a Pareto improvement along the transition path. Our findings highlight the potential for tax-based redistribution to replace pension-based insurance. |
| Keywords: | social security reform, labor income tax, redistribution, insurance, welfare effects |
| JEL: | C68 E62 H55 J26 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18810 |
| By: | Nezih Guner (CEMFI and Banco de España); Eugenio Renedo (CEMFI, Centro de Estudios Monetarios y Financieros); Emre Enes Yavuz (Reddit) |
| Abstract: | We study how the specification of wage risk in quantitative life-cycle models changes the welfare evaluation of taxes and transfers. We estimate four wage processes: a canonical linear process, a flexible nonlinear process with age dependence, non-normality, and state-dependent persistence, and two intermediate processes; comparisons across the four isolate the role of each feature: age dependence, non-normality, and nonlinear persistence. The estimated processes imply different allocations of wage risk across permanent, persistent, and transitory components: the richer processes assign less risk to short-lived transitory shocks and more to long-lived permanent and persistent components. We embed each process in the same incomplete-markets life-cycle economy with endogenous labor supply. Removing federal tax progressivity and means-tested transfers raises mean welfare by 0.72% of lifetime consumption under the nonlinear process but lowers it by 0.47% under the non-normal process. These welfare differences reflect both the total amount of wage risk and its allocation across permanent heterogeneity, persistent shocks, and transitory shocks. Holding this amount and allocation fixed, non-normal shocks create rare but severe low-income states that increase the value of public insurance, while the state-dependent mean reversion that characterizes the nonlinear specification works in the opposite direction: unusually bad persistent states tend to be undone by subsequent favorable shocks, so the wage process partly insures itself, and that lowers the value of public insurance. |
| Keywords: | Wage risk, nonlinear wage dynamics, social insurance, taxes and transfers, life-cycle models. |
| JEL: | D15 D31 E21 H21 I38 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cmf:wpaper:wp2026_2611 |
| By: | Asher, Twisha; Giangregorio, Luca; Morelli, Salvatore; Schechtl, Manuel; Subioli, Francesca |
| Abstract: | This paper introduces a new harmonized global database on estate, inheritance, and gift (EIG) taxation, covering more than 170 countries, some with data going back to the 18th century, and all U.S. states from 2006. Despite substantial and persistent cross-country heterogeneity in tax design, we document a declining trend in the adoption and progressivity of EIG taxes since the 1980s. Using a two-way fixed effects (TWFE) framework complemented with an event-study approach, we find that a one percentage point increase in the top rate is associated with approximately 8% higher revenues between 1965 and 2022, with larger effects (9–17%) from 1995 through 2019. U.S. state-level estimates echo these results with a semi-elasticity of about 11%. An event-study analysis of 54 significant tax policy reforms shows no evidence of pre-existing differential trends and reveals dynamic effects: revenues decline by roughly 50% within four years following a cut of at least 10% in top rates, with symmetric effects for rate increases of similar proportion. Guided by a conceptual framework, we parse out the conditions that leads steady-state top wealth shares to fall when the average EIG tax rate increases. Using TWFE specifications with 5-, 10-, and 15-year lags, we find evidence consistent with the theoretical prediction. A one percentage point increase in the top marginal tax rate is associated with a 0.11-point decline in the Gini coefficient after 10 years, with consistent effects across top and bottom wealth shares. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2026–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:a8mzj_v1 |
| By: | Shrestha, Aavash; Zhang, Qi; Etienne, Xiaoli; Tejeda, Hernan; Trujillo-Barrera, Andres |
| Abstract: | Carbon taxes are economically efficient but often face public resistance, especially in food markets where taxes may raise concerns about affordability and fairness. This study examines whether revenue earmarking can improve U.S. consumer acceptance of a carbon tax on dairy products. We conduct a discrete choice experiment with 1, 169 U.S. primary grocery shoppers using yogurt as the product context. Alternatives vary by base price, carbon tax rate, and revenue use. Earmarking options include nutrition assistance, dairy emissions-reducing R&D, animal welfare and food safety improvements, and general government revenue. Results from a conditional logit model show that consumers respond negatively to higher base prices and to higher carbon tax rates when revenues are allocated to general government revenue. However, the positive and statistically significant interactions between the carbon tax rate and the earmarking indicators show that revenue use substantially changes consumers’ valuation of the tax. WTP estimates for a one-percentage-point increase in the carbon tax rate are negative under general government revenue (-$0.055), positive and statistically significant under nutrition assistance earmarking ($0.018), negative but smaller in magnitude under emissions-reducing R&D (-$0.011), and positive under animal welfare and food safety earmarking ($0.006). These findings suggest that revenue design is central to the acceptability of food carbon taxes. Earmarking revenues toward visible and socially meaningful purposes, especially nutrition assistance, may help reduce consumer resistance and broaden support for climate policy in food markets. |
| Keywords: | Environmental Economics and Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404503 |
| By: | Sami Jysmä; Youssef Benzarti; Jarkko Harju |
| Abstract: | Discrete policy thresholds are pervasive in tax and regulatory systems and can substantially distort behavior. We show that notches acting as barriers to mobility within a distribution generate distortions extending far beyond the threshold. The same mechanism biases conventional difference-in-differences estimators, and we propose a new methodology to recover causal effects. Applying the method to the abolition of a size-based payroll tax notch, we find that the notch reduced the number of firms above the threshold by 18 percent and lowered treated firms' employment, capital stock, and value added by 10 percent, whereas conventional difference-in-differences estimates imply negligible effects. |
| Keywords: | size-based regulation, notches, difference-in-differences, payroll tax |
| JEL: | H30 C01 H25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12821 |
| By: | Jarkko Harju; Ida Kankaanranta; Kaisa Kotakorpi |
| Abstract: | We study the effects of taxi market deregulation in Finland, which removed price controls and lowered barriers to entry. The reform led to a surge in firm entry and a modest increase in exit, indicating substantial changes in market structure. Average taxi prices increased slightly according to price indices, while monthly firm-level reported sales and VAT declined by over 10 percent. Operating costs and mileage remained largely unchanged, suggesting limited demand responses. These findings point to increased tax evasion following deregulation. Consistent with this interpretation, we document a small rise in property crime, with no effects on other criminal offenses. |
| Keywords: | taxi market, deregulation, prices, sales, mileage, exit, entry, tax evasion, crime |
| JEL: | L52 L91 L98 H26 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12819 |
| By: | José Victor C. Giarola; Olivier Marie; Frank Cörvers; Hans Schmeets |
| Abstract: | We study a policy change in the Netherlands that unexpectedly reduced the duration of preferential tax treatment for high-skilled migrants from specific countries. Using administrative data, we document substantial out-migration responses driven entirely by the top 1% of earners, with no detectable response below the 95th percentile. Among the 95-99th percentile, previously internationally mobile workers also leave sooner, particularly to countries offering tax breaks, consistent with tax shopping behavior and pointing to distortionary effects of international tax competition. Increased tax intake from remaining workers offsets revenue lost from departing high earners, making the policy fiscally cost-neutral. |
| Keywords: | taxation, immigration, labor income, Netherlands |
| JEL: | F22 H31 J61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12813 |
| By: | Oliver Skultety (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jan Zalman (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper studies the capitalization of property taxes into housing prices by exploiting a unique institutional setting. We utilize a nationwide reform that raised the statutory base rate of the property tax by 80% while simultaneously restricting the fiscal instruments municipalities could use to mitigate the hike. Exploiting a population-based discontinuity in tax rates, we deploy a difference-in-discontinuities design to jointly identify municipal tax-setting behavior and asset price capitalization. We show that prior to the reform, municipalities aggressively used local coefficients to offset statutory rates. Following the reform, however, local governments failed to utilize their remaining discretionary tools to offset the tax increase, leaving residents with a higher effective tax burden. Despite this substantial fiscal shock, we find no evidence that the resulting tax wedge is capitalized into housing prices. Our findings demonstrate that accounting for endogenous municipal responses to nationwide policy shocks is vital for accurately evaluating the economic incidence of property taxation. |
| Keywords: | Property tax, municipal tax-setting, tax competition, capitalization |
| JEL: | H71 H73 H22 R21 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_21 |
| By: | Verma, Surbhi |
| Abstract: | This case note examines the Full Federal Court of Australia's decision in Oracle v Commissioner of Taxation, which repositioned the Mutual Agreement Procedure (MAP) as the presumptive primary forum for resolving cross-border tax treaty disputes ahead of domestic litigation. It analyses the Court's treatment of taxpayer sequencing rights under the MLI, the evidentiary threshold for revenue-authority public interest objections, and the decision's implications for jurisdictions, including India and other Global South economies, facing structural conflicts between domestic limitation periods and MAP timelines. |
| Date: | 2026–07–14 |
| URL: | https://d.repec.org/n?u=RePEc:osf:lawarc:hg7qn_v1 |
| By: | Bustos, Sebastian; Pomeranz, Dina; Suárez Serrato, Juan Carlos; Vila-Belda, José; Zucman, Gabriel |
| Abstract: | Profit shifting by multinational corporations is thought to reduce tax revenue around the world. This paper provides a comprehensive analysis of the introduction of standard regulations to limit profit shifting. Using administrative tax and customs data from Chile, we find that the reform was ineffective in reducing multinationals’ transfers to lower-tax countries and did not significantly raise tax payments. Interviews with tax advisors and employment history data reveal a drastic increase in consulting services. Our results illustrate that when enforcement can be circumvented by sophisticated tax planning, it can benefit tax consultants at the expense of tax authorities and taxpayers. |
| JEL: | F23 H26 O23 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20207 |