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on Public Finance |
| By: | Bastani, Spencer (IFAU - Institute for Evaluation of Labour Market and Education Policy); Blomquist, Sören (Department of Economics, Uppsala University); Gahvari, Firouz (Department of Economics, University of Illinois at Urbana-Champaign); Micheletto, Luca (Department of Law, University of Milan, and Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University; UCFS; CESifo); Tayibov, Khayyam (Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Sweden) |
| Abstract: | We study optimal housing taxation in a Mirrleesian framework where individuals differ in both labor productivity and land ownership. Housing services are produced by combining scarce land with structures that require maintenance, which can be performed either in-house or through market purchases. We first characterize optimal allocations under information and resource constraints. We then restrict the government to the use of proportional housing taxes. Numerical simulations show that uniform taxation of land and structures is desirable only when political constraints prevent the imposition of very high land taxes. Otherwise, the optimal policy is to tax land at a much higher rate than structures, while still imposing a positive tax on structures to mitigate distortions from income taxation. A positive marginal tax on labor income incentivizes in-house over market-purchased maintenance. To prevent an inefficiently large reliance on in-house maintenance, optimal policy should generally subsidize market-purchased maintenance services. |
| Keywords: | Optimal taxation; housing capital; land; labor supply; maintenance |
| JEL: | D11 D31 H31 R21 |
| Date: | 2025–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:ifauwp:2025_008 |
| By: | Laura E. Jackson; Christopher Otrok; Michael T. Owyang; Nora Traum |
| Abstract: | We propose a method to decompose changes in the tax structure into orthogonal components measuring the level and progressivity of taxes. Similar to tax shocks found in the existing empirical literature, the level shock is contractionary. The tax progressivity shock is expansionary: Increasing tax progressivity raises (lowers) disposable income at the bottom (top) end of the income distribution by shifting the tax burden from the bottom to the top. If agents’ marginal propensity to consume falls with income, the rise in consumption at the bottom more than compensates for the decline in consumption at the top. The resulting increase in output and consumption leads to rising capital gains for those at the high end of the income distribution that more than offsets their losses from higher income taxes. The net result is that an increasing progressivity leads to an increase in income inequality, contrary to what conventional wisdom might suggest. We interpret these results as evidence in favor of trickle up, not trickle down, economics. |
| Keywords: | taxes; income inequality; FAVAR |
| JEL: | C32 C38 E62 |
| Date: | 2025–04–24 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:99953 |
| By: | Christopher R. Knittel; Gilbert E. Metcalf; Shereein Saraf |
| Abstract: | With the increase in fuel economy of the personal transportation fleet along with the increased penetration of hybrid and electric vehicles, federal motor vehicle fuel excise tax revenue has been steadily declining. This has led to calls for finding a replacement for this tax. One option is to replace the gas tax with a vehicle miles traveled (VMT) tax. To investigate the impact of such a tax swap, we combine data from the 2017 National Household Transportation Survey (NHTS) and the American Community Survey (ACS). Using machine learning techniques, we generate estimates of VMT and gasoline tax collections at the census tract level. This allows us to explore the distributional implications of this tax swap at a geographically disaggregated level. We find, as have previous researchers, that this tax swap is modestly progressive. Our more granular geographic analysis highlights striking disparities not previously reported. We find that rural areas and census tracts in the center of the country generally benefit from this tax swap, while urban and bicoastal areas generally experience higher taxation. Additionally, Republican-leaning districts, which overlap significantly with rural areas, see marked gains compared to Democratic districts. |
| JEL: | H22 H23 Q48 R48 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33894 |
| By: | Guillermo Peña |
| Abstract: | Purpose: The present paper analyzes the current situation of taxation of financial services, pointing out the main alternative taxation methods. Design/methodology/approach: It is carried out an analysis of them, through the application of all of them to the same numerical example. Originality: Subsequently, a comparison of several methods is carried out based on the results of the numerical example and its essential characteristics. Findings: As a result, a method is found that is both approximately correct and feasible for taxing financial services in VAT, for example, by applying the recently proposed mobile-ratio method. |
| Keywords: | financial VAT, taxation methods, VAT, financial services, exemption |
| JEL: | H21 H25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11909 |
| By: | Manabu Nose; Mr. Nicola Pierri; Mr. Jiro Honda |
| Abstract: | This paper explores how digitalization in the corporate sector can boost tax revenue collection, . finding that stronger firm digitalization is associated with higher tax revenues across countries and also higher tax paid across firms. The cross-country estimates illustrate that a one-standard-deviation increase in firm digitalization is associated with an increase in tax revenues-to-GDP by up to 3 percentage points, conditional upon the level of digitalization of tax administration (GovTech). A firm-level analsis reveals that firm digitalization significantly improves tax compliance among high-risk taxpayers, such as small and informal enterprises, particularly in the service sector. This indicates that digitalization not only broadens the corporate tax base but also plays a crucial role in improving tax compliance. Moreover, both country and firm-level analyses reveal a significant synergy between firm digitalization and GovTech, undescoring the importance of promoting both to enhance tax collection. These analyses also suggest that, in developing countries, it is essential to create enabling environments for firm digitalization and GovTech and address any constraints to achieve their synergy effects. |
| Keywords: | Tax compliance; Public-Private digitalization; GovTech |
| Date: | 2025–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/089 |
| By: | Irene Di Marzio; Sauro Mocetti; Enrico Rubolino; Enrico Rubolino |
| Abstract: | This paper presents evidence of market externalities of tax evasion: firms' tax non-compliance distorts the outcomes of their competitors. Using novel administrative data on the universe of Italian firms, we compute a tax evasion proxy as the fraction of individual firms that manipulate their revenue to meet eligibility criteria for preferential tax regimes. Our empirical approach uses policy-induced changes in tax notches' size to predict the fraction of non-compliant firms in each market. We find that non-compliant firms lead to significant revenue and productivity losses for their competitors, who then pass on some of this burden to their workers. This unfair competition harms aggregate productivity, partly due to a worsening of allocative efficiency. Our findings show that cracking down on tax evasion not only increases tax revenue and promotes tax fairness, but can also enhance market efficiency by leveling the playing field. |
| Keywords: | tax evasion, market competition, preferential tax regimes |
| JEL: | H26 H25 D22 D43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11896 |