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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: | H21 H24 H25 C68 E25 O31 O40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:hit:cisdps:710 |
| By: | Myeongju Kim (Yonsei University); Eunseong Ma (Yonsei University) |
| Abstract: | This paper studies how the macroeconomic effects of tax cuts depend on occupational targeting—toward entrepreneurs versus wageworkers. Using a new state-level panel of occupation specific federal tax shocks for the United States from 1981 to 2017, we find that entrepreneur targeted tax cuts generate substantially larger increases in output, consumption, and employment than revenue-equivalent worker-targeted cuts. These effects coincide with increases in both entrepreneurship and wage employment, pointing to business formation and firm expansion as key transmission channels. An incomplete-markets model with occupational choice attributes these findings to earnings-based borrowing constraints and demand-driven amplification that jointly produce large entrepreneur multipliers. |
| Keywords: | Tax policy, Entrepreneurship, Earnings-based constraints, Occupational choice |
| JEL: | E62 H25 J23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-291 |
| By: | Michaël Sicsic; Diana Hourani |
| Abstract: | Population ageing is a major structural trend across OECD countries, with significant implications for public finances, yet its effects on tax revenues remain relatively understudied. This working paper examines the effects of demographic change on tax systems by analysing the distribution of tax bases across age groups and assessing the impact of ageing. It also explores how tax design may further exacerbate revenue pressures. The paper then analyses the implications of population ageing for labour income tax revenues as the working-age population evolves and considers how the relative importance of other tax bases such as consumption, capital income, and wealth-related taxes, may change depending on policy design. It also presents simulations of tax-to-GDP ratios from 1950 to 2060 that isolate the mechanical effects of demographic change under a no-policy-change scenario. These simulations illustrate how population ageing may influence tax revenues across OECD countries over time. The paper also highlights how tax system vulnerability to ageing is shaped by both demographic trends and tax design. Finally, it discusses potential policy considerations and areas of further work. |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ctpaaa:75-en |
| By: | Di Novi; C.;; Salari; P.; |
| Abstract: | Sugar-sweetened beverages are a major source of free sugars in Western diets. In response, several European countries have introduced taxes to encourage product reformulation and reduce consumption. This study assesses how these taxes affected sales in off-trade and on-trade markets, examines consumers’ potential substitution effects using Euromonitor data (2004–2019), and evaluates manufacturers’ reformulation responses through Mintel product -launch data (2010–2019). We focus on six countries that implemented such taxes, specifically Belgium, France, Hungary, Ireland, Portugal, and the United Kingdom , and additionally analyse Denmark, which introduced a similar tax earlier and repealed it in 2014, providing a reverse test case. Using a synthetic control approach, we construct counterfactual scenarios to estimate tax impacts. We find significant sales effects only under progressive tax designs, while reformulation emerged consistently, particularly where sugar thresholds and implementation timelines were clearly defined. |
| Keywords: | sugar-sweetened beverages (SSBs); unhealthy diets; excise taxes; fiscal policy; consumption patterns; food industry; reformulation;synthetic control method; public health; |
| JEL: | H2 H3 I12 I18 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:26/07 |
| By: | Nicolo Ceneri; Giuseppe Lopomo; Alessandro Villa; Nicolas Werquin |
| Abstract: | We study optimal taxation in economies with general equilibrium market clearing, where agents with privately known labor skills and entrepreneurial abilities choose between deterministic labor income and risky firm operation. The government observes labor income and realized dividends but not effort or technology shocks. We formulate the multidimensional screening problem as a lottery-based linear optimization, accounting for global incentive constraints, fixed costs and other non-convexities. Optimal policies exhibit tax breaks, which can render net taxes negative, for agents with intermediate entrepreneurial abilities and labor skills above a threshold. General equilibrium strengthens this effect under decreasing returns, as labor-market clearing requires sufficient entry into entrepreneurship, further increasing subsidies for agents with high worker options. In a calibrated U.S. economy, optimal taxes are lower and can be negative for low-profit realizations. Subsidies rise when risk declines and when the frequency of high-ability entrepreneurs in the population diminishes. |
| Keywords: | Optimal taxation; Multidimensional screening; Occupational choice; Entrepreneurial risk; linear optimization |
| JEL: | D82 E60 H21 H24 H25 L26 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedhwp:103283 |
| By: | Alberto Chong (Georgia State University and Universidad del Pacifico); Erica Louis Mtenga (Department of Economics, University of Dar es Salaam and Environment for Development (EfD)) |
| Abstract: | We focus on the role of double taxation treaties on environmental quality, to our knowledge the first empirical study to do so. Tax treaties are primarily implemented to remove double taxation, which helps promote international trade and investment. However, they are also aimed to address tax evasion and avoidance, which tends to have the opposite effect. As a result, the environmental impact is unclear. Specifically, we exploit the variation in the effective dates of the United States tax treaties with emerging countries between 1990 to 2014 by applying difference-in-differences methods. We find that tax treaties significantly help reduce carbon dioxide emissions in emerging markets. This appears to be driven by the reduction in investments in pollution-intensive industries after tax treaty enactments. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2621 |
| By: | Kunze Li (Beijing Normal University); Kanda Naknoi (University of Connecticut); Kai Zhao (University of Connecticut) |
| Abstract: | We provide empirical evidence that asset returns are correlated across genera-tions and that this correlation has significant consequences for the distribution of wealth. Using the Panel Study of Income Dynamics and asset price databases, we find that a 10-percentile increase in a father’s wealth return rank is associated with an approximately 3-percentile increase in his child’s corresponding rank. Next, we construct an overlapping-generations model in which dynasties are linked through returns, earnings, and bequests. Our counterfactual experiments show that the intergenerational correlation in returns (ICR) accounts for a significant fraction of top wealth shares and the ICR is an important driver of persistence at the top of the wealth distribution. Thus, incorporating the ICR alters predictions about the aggregate and distributional effects of estate taxation, with important policy implications. |
| Keywords: | wealth inequality, returns, intergenerational persistence, estate tax |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:uct:uconnp:2026-02 |
| By: | OECD |
| Abstract: | This paper examines how tax-benefit systems relate to subjective well-being in European countries using both micro- and macro-level data. At the micro level, net transfers are strongly and positively associated with life satisfaction among the bottom half of the income distribution, while net taxes have only weak or slightly negative associations for the top income quintile. At the aggregate level, the tax burden is negatively associated with life satisfaction, but this relationship is weaker, or even offset, in countries with high government effectiveness. Overall, inclusive tax-benefit systems can enhance subjective well-being when combined with good governance. |
| Keywords: | governance, income distribution, life satisfaction, redistribution, subjective well-being, tax benefit system |
| JEL: | D63 H24 H53 I31 H11 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:wiseaa:39-en |
| By: | Dietrich, Stephan (Maastricht Graduate School of Governance, RS: GSBE MGSoG, RS: UNU-MERIT Theme 2); Markhof, Yannick (Maastricht Graduate School of Governance, RS: GSBE MGSoG); Vincent, Rose Camille |
| Abstract: | We provide novel evidence on bureaucratic fragmentation and weak tax administrations as central enablers of low revenue mobilization in low-income countries. In collaboration with the municipal and national tax authorities in Kampala, Uganda, we cross-link previously siloed tax records for 155, 000 firms and conduct a large-scale experiment with 60, 000 firms. We document pervasive and selective tax evasion: only 14% of verifiably active firms comply with both government tiers. Cross-record linkage almost triples detectable non-compliance while offering increased enforcement efficiency. This coordination dividend is left untapped. Firms exploit the resulting loopholes through partial informality, re-registering under new identities, and strategic late payments. In a cross-authority field experiment, deterrence nudges, including messages signaling inter-authority coordination, fail to offer a light-touch alternative to addressing fragmentation directly. Our findings establish bureaucratic fragmentation as a distinct and costly source of passive waste in tax administration that existing approaches to revenue mobilization rarely address. |
| Keywords: | Taxation, Tax evasion, Tax administration, Low-income countries, Nudges |
| JEL: | H26 H20 H71 C93 O12 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2026007 |
| By: | Zohal Hessami; Maximilian Thomas; Georg U. Thunecke |
| Abstract: | This paper investigates the short- and medium-term causal impact of austerity on local fiscal, economic, and political outcomes. We exploit a 2013 state-level austerity program in Hesse, Germany and manually code 2, 900 consolidation measures for 86 municipalities, distinguishing between tax- and expenditure-based strategies. Using synthetic difference-in-differences (SDID) estimations, we compare treated municipalities to a control group of 4, 630 municipalities in states without an austerity program. Overall, treated municipalities consolidate through tax hikes (business +12%, property +65%) and expenditure cuts (personnel -6%, investments -62%). Austerity generally stabilizes municipal finances but hurts labor markets (number of firms -13% , salaries -9% , jobs -6%). Economic costs vary across consolidation strategies: tax-based consolidation reduces business tax bases and employment, while expenditure-based consolidation depresses apartment rents. Political costs arise only when consolidation relies heavily on a single instrument. |
| Keywords: | austerity, tax hikes, expenditure cuts, local public finances, consolidation strategies |
| JEL: | H39 H72 H81 R51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12679 |
| By: | Stephan Dietrich (Masstricht University); Yannick Markhof (ETH Zurich); Rose Camille Vincent (Institute for Fiscal Studies) |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:ifs:ifsewp:26/39 |
| By: | Ana Herrero-Alcalde (UNED); Jorge Martinez-Vazquez (Georgia State University); Eduardo Sanz-Arcega, (Universidad de Zaragoza); Jose Manuel Tranchez-Martin (UNED) |
| Abstract: | The aim of this paper is to assess whether a generational divide in tax attitudes might be emerging in welfare states, potentially challenging the current constitutional consensus on taxation. Using Spain as a case study, we rely on the unique questionnaire included in the 2024 wave of the Spanish Institute for Fiscal Studies' Fiscal Barometer to examine whether such generational divide might be emerging in tax attitudes. Specifically, we are first to provide intergenerational evidence on whether current adult generations differ in their intrinsic motivation to pay taxes, their opinions about the redistributive aim of tax systems and their preferences regarding the direct-indirect tax mix. According to our results, Baby Boomers tend to express higher levels of tax morale and a wider acceptance of the tax system - particularly direct taxes - as a tool to redistribute income. In contrast, younger adult generations are found to embrace significantly lower levels of those same dimensions. These results raise the question of whether current levels of political and gender polarization over public policy may also contribute to an eventual generational divide in tax attitudes and eventually threaten the sustainability of the welfare state. Our additional analyses somewhat surprisingly find that younger male generations exhibit slightly stronger pro-tax attitudes than their female counterparts. Should these differences in preferences and tax attitudes become structural and entrenched, the current fiscal consensus may be heading for a cliff and the sustainable funding of the welfare state might no longer be taken for granted. Several policy recommendations follow. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ays:ispwps:paper2622 |
| By: | Christl Michael; Navarro Berdeal Silvia (European Commission - JRC) |
| Abstract: | This paper assesses the fiscal and distributional effects of personal income tax expenditures in Portugal using EUROMOD microsimulation and 2022 EU-SILC microdata. We compare the 2023 tax-benefit system with a counterfactual scenario in which each tax expenditure category is removed individually to estimate first-round fiscal, distributional and cost-efficiency impacts. We find that tax expenditures account for almost 40% of personal income tax revenues and predominantly benefit middle-income households, with substantial variation in redistributive effectiveness across instruments. Work-related and pension-related tax expenditures are regressive, increasing inequality relative to the baseline, while family, health, housing and education-related provisions are broadly neutral. The Net income guarantee (‘Mínimo de Existência’) tax allowance, stands out as the only progressive instrument and is the most cost-efficient tax expenditure on both inequality and poverty dimensions. These findings suggest that reallocating fiscal resources from broad-based, regressive provisions towards targeted instruments such as the ‘Mínimo de Existência’ could yield greater redistributive returns. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202605 |
| By: | Arthur Apostel (-) |
| Abstract: | The Belgian wealth transfer tax system stands out internationally by the large wedge between inheritance and gift tax rates, even shortly before death. I document an increased use of gifts at the top of the distribution, thereby rendering the wealth transfer tax system regressive at the very top despite highly progressive inheritance tax rates. I further analyze the wealth transfer distribution by gender, age, region, and education. The research is based on 2009-2022 administrative inheritance tax data with full population coverage, linked to gift tax microdata, census data, and national registry data. I compare the administrative transfer flows to HFCS survey data, finding substantial undercoverage in HFCS data. This finding suggests caution in interpreting survey-based estimates of wealth transfer flows. |
| Keywords: | Inheritance, gift, wealth transfer, inequality, Belgium |
| JEL: | D3 G5 H2 N3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:26/1144 |
| By: | Bíró, Anikó; Elek, Péter; Jascisens, Vitalijs; Prinz, Daniel; Sándor, László; Zasova, Anna |
| Abstract: | This paper studies the interaction of the contribution-benefit link with tax evasion in the context of parental benefits in Hungary and Latvia. Across the two countries, institutional settings, and time periods, earnings and employment patterns suggest substantial pre-pregnancy underreporting, followed by partial formalization during pregnancy to increase benefits. Using policy reforms, the paper shows that the reporting response tracks changing incentives. The results indicate that even with third-party reporting, income underreporting can be common. Linking benefits to contributions when earnings are underreported may reduce evasion temporarily but can impose net fiscal costs depending on program design. |
| Date: | 2026–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11385 |
| By: | Bjørkheim, Julie Brun (Institute for Sosial Research); Iden, Hanna (Dept. of Business and Management Science, Norwegian School of Economics); Kristoffersen, Marte (Dept. of Business and Management Science, Norwegian School of Economics); Zoutman, Floris (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | Governments across Europe lose significant tax revenue to cum-cum trading — a strategy in which taxed investors temporarily transfer shares to tax-favored entities around dividend dates to exploit withholding tax differentials. We compare Norway’s 2019 enforcement reform to Denmark’s successful 2016 reform. Using daily securities-lending data, we show that spikes in shares on loan around ex-dividend dates disappeared in Denmark immediately after the reform but remain fully intact in Norway. We estimate that Norway loses at least NOK 550 million annually to continued cum-cum activity. The decisive difference lies in the information architecture: Denmark abolished relief-at-source, requiring everyone to file a refund claim and submit documentation to tax authorities, creating a comprehensive transaction paper trail. Norway’s reform tightened documentation requirements but left relief-at-source intact, meaning tax-favored investors never file a claim and remain invisible to the tax administration. These findings have direct implications for the forthcoming EU FASTER Directive. |
| Keywords: | Tax Enforcement; Documentation Requirement; Dividend Tax; Security Lending |
| JEL: | G18 H26 K22 M21 |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2026_004 |