Matthew Weinzierl, 03 September 2017

Under a welfarist approach, tax policy is judged on its implications for the well-being of those in the society to which it applies. An implicit vulnerability of this approach is that judgements are based on necessarily incomplete cost and benefit calculations. This column investigates people’s preferences for welfarist and non-welfarist approaches by exploring responses to envy. A narrow majority of respondents reject a redistribution of resources that raises overall welfare by assuaging envy. These respondents seem to be using non-welfarist principles to encode concerns about indirect policy consequences.

Roger Douglas, Robert MacCulloch, 25 May 2017

The future of publicly funded welfare states is in doubt as costs trend upward, yet there is little agreement about the shape of the necessary reforms. This column uses the case of New Zealand to show how tax cuts can be designed to establish compulsory savings accounts so that a publicly funded welfare system can be changed into one that relies largely on private funding. Transparent pricing of services can be introduced, offering the potential for efficiency gains. The government retains sufficient revenues to act as ‘insurer of last resort’ for those individuals unable to meet welfare expenses out of their savings accounts.

Don Fullerton, Nirupama Rao, 03 May 2017

In the 2012 US presidential election, Mitt Romney famously asserted that 47% of the population were long-term dependents of the government – ‘takers’, not ‘givers’ to the system. This column examines this claim using long-spanning household-level data. Even though many households find themselves not paying tax or receiving public benefits in at least some years, only a small fraction consistently pay no tax or consistently receive public transfers.

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.

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