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on Public Finance |
| By: | Dirk Krueger (University of Pennsylvania, CEPR and NBER); Chunzan Wu (Peking University) |
| Abstract: | Household consumption and welfare are more strongly associated with lifetime income, but most countries base income taxes on current income and use progressive taxes to reduce inequality and provide social insurance. Is lifetime income a better tax base for a government seeking to provide social insurance and redistribution? To answer this question, we build a quantitative life-cycle model of heterogeneous households with endogenous labor supply and idiosyncratic wage risks, and calibrate it to the U.S. economy. We document that switching to a lifetime income tax leads to a more efficient distribution of hours worked over time and across states of the world. This benefit rises with tax progressivity under a lifetime income tax, whereas the opposite is true under an annual income tax. Consequently, the optimal lifetime income tax is more progressive and achieves larger ex-ante welfare for a cohort of households than the optimal annual income tax. |
| Keywords: | Lifetime Income Tax, Progressive Taxation, Redistribution, Social Insurance. |
| JEL: | E60 H20 |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:25-011 |
| By: | Bradbury, David; O'Reilly, Pierce |
| Abstract: | This Perspective discusses the fiscal and economic impacts of the global minimum tax; currently being implemented by many countries around the world. The global minimum tax is expected to raise tax revenues, reduce profit-shifting, and allow jurisdictions to strike a better balance between supporting investment and mobilising domestic revenues. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:colfdi:314444 |
| By: | Cremer, Helmuth; Gahvari, Firouz |
| Abstract: | This study contributes to the long-term care policy literature by exploring how, in an uncertain environment, redistributive tax policies and long-term care program design interact with informal care incentives, shaping long-term caregiving outcomes. The analysis is done within an overlapping-generations model in the steady state under full and asymetric information. Altruistic children provide informal care to their elderly parents if dependent. Not all children are altruistic. Children’s level of altruism is shaped by the time and attention they received in childhood. Key findings, under asymetric information, include: (i) Allocations are distorted for redistributive purposes, except for savings, (ii) marginal income tax rates are positive, aligning with standard nonlinear income taxation models, and (iii) a consequence of government’s redistributive policies is to encourage time spent with children thus incresing family caregiving. These three findings apply to both “opting out” and “topping up” schemes. (iv) Savings must be subsidized in an opting out system due to fiscal externalities; (v) if public assistance carries a stigma, it may have to be distorted upward; the opting-out policy welfare dominates the topping-up policy. Finally, if long term care provision carries no stigma, opting out is more cost-effective than topping up in both first- and second-best. |
| Keywords: | Long term care; uncertain altruism; opting out; topping up; public insurance |
| JEL: | H2 H5 |
| Date: | 2025–03–13 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130430 |
| By: | Oliver Hümbelin; Maurizio Strazzeri; Olivier Lehmann |
| Abstract: | This paper examines the impact of the COVID-19 pandemic on income and wealth inequality in Switzerland, with a particular focus on poverty dynamics and the role of the social security system. Using newly linked administrative tax data for four cantons covering over a third of the Swiss population, we track changes in household income and liquid assets from 2019 to 2021. We find that average net household income increased during the pandemic. However, households at the bottom and top of the income distribution experienced income declines, and a substantial share of households across all income groups faced losses in income or liquid assets. These effects were especially pronounced in the lower deciles. Despite this, relative and absolute poverty rates declined, largely due to the stabilizing effect of existing and newly introduced social security measures. Our results suggest that the Swiss social safety net—including extensions to unemployment benefits, short-time work compensation, and targeted COVID-19 support—effectively mitigated the immediate economic impact of the crisis. The findings underscore the importance of timely and well-targeted state interventions to prevent increases in poverty during large-scale economic shocks. |
| Keywords: | COVID-19 Pandemic, Public Economics, Inequality, Poverty, Tax Data |
| JEL: | D31 D33 H12 |
| Date: | 2025–03–26 |
| URL: | https://d.repec.org/n?u=RePEc:bss:wpaper:50 |
| By: | Congressional Budget Office |
| Abstract: | Investment in wind and solar electric power is directly supported by two tax credits, the investment tax credit (ITC) and the production tax credit (PTC), which were modified and extended by the 2022 reconciliation act. In CBO’s January 2025 baseline budget projections, the ITC and PTC together increase projected deficits by $308 billion from 2026 to 2035. The tax credits provide an incentive for private-sector investment; CBO estimates that without them, investment in wind and solar electric power from 2024 to 2026 would be about one-third less than is expected with the credits in |
| JEL: | H23 H25 Q48 |
| Date: | 2025–04–11 |
| URL: | https://d.repec.org/n?u=RePEc:cbo:report:61188 |