Taxation

Enrico Rubolino, Daniel Waldenström, 29 April 2017

The responsiveness of high-income earners to taxation is a central aspect of tax system design. This column presents patterns in the tax elasticity of top earners for up to 30 countries over a period of 115 years. Tax elasticities vary tremendously over time, space, and income, with a J-shaped pattern emerging over the past century. Tax avoidance behaviour strongly influences the elasticity of the very top earners, while there is less support for the role of labour supply responses across earners.

Enrico Rubolino, Daniel Waldenström, 13 April 2017

The link between tax progressivity and the income distribution is the subject of intense debate. This column presents new evidence from tax reforms during the 1980s and 1990s to examine how reduced progressivity affects top income shares. Reduced progressivity boosted top incomes, particularly for those in the top 0.1% of earners. Income tax changes are therefore a plausible candidate for explaining the recent surge in income inequality.

Rachel Griffith, Martin O'Connell, Kate Smith, 21 March 2017

Governments have long used taxation to correct for the socially costly overconsumption of alcohol, but as the external cost of overconsumption varies across drinkers, a single tax rate is not optimal. This column argues that variation in preferences for different products and in price responsiveness across heavy and light drinkers provides scope to improve welfare by varying tax rates across alcohol products. The proposed framework is well suited to addressing other sources of external costs, such as obesity.

Xavier Vives, 14 February 2017

Tobin taxes on financial markets, such as the EU Financial Transactions Tax, are regularly under consideration. This column argues that a rationale for a Tobin tax exists even in competitive and informationally efficient markets when traders have private information and they condition on prices. In this situation traders overreact to private information, and a transactions tax may offset this externality. 

Paolo Pasimeni, Stéphanie Riso, 19 January 2017

EU budget reform is a key issue in policy debates, in particular the redistributive effects between member states. This column assesses redistribution within the EU budget over the period 2000 to 2014. It finds that the net redistributive impact of the EU budget is rather small and, contrary to common belief, that the revenue side is more progressive than the expenditure side.

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