Taxation

Charles Goodhart, Michael Hudson, 11 June 2018

The increasing income and wealth inequalities within countries is one of today’s great social concerns. This column describes how the tendency towards increasing indebtedness in much earlier societies was held in check by debt-cancellation Jubilees, and discusses ways to deal with today’s debt overhang and accompanying wealth inequalities. The funding of a modern Jubilee could come mostly, perhaps entirely, from a land/or property tax.

Willem Buiter, Anne Sibert, 30 May 2018

In December 2017 the US federal corporate tax rate on profits over $10 million was reduced from 35% to 21%. This column examines the plausibility of the Council of Economic Advisers’ estimates of how a cut in the corporate profit tax rate would boost average household income, and argues that three other features of the corporate tax regime and the wider economy are central to determining the effects of such a cut: the deductibility of capital expenditure and of interest payments from the corporate profit tax base and the impact of the corporate tax cut on private and public consumption demand.

William C. Boning, John Guyton, Ronald Hodge, Joel Slemrod, Ugo Troiano, 25 May 2018

Tax evasion remains a pervasive problem. Fighting it efficiently is crucial, as resources spent on enforcement can’t be spent elsewhere in society. This column describes the outcomes of an enforcement experiment targeting at-risk firms in the US. Notification of risk status by letter saw an increase in remittances of 34%, while notification by in-person visit increased remittances by 276%. Remitted taxes also increased for the network neighbours of firms that received an in-person visit.

Xavier Debrun, Luc Eyraud, Andrew Hodge, Victor Lledo, Catherine Pattillo, 22 May 2018

Less than five years into the great euro experiment, the president of the European Commission at the time judged Europe’s limit on public deficits to be "stupid". A more intriguing question, however, is whether numerical constraints on broad indicators of fiscal performance can contain politicians’ penchant for borrowing too much and at the wrong time. This column summarises lessons from recent research on fiscal rules, including the new generation of ‘smart’ rules that emerged around the Global Crisis. Rules can mitigate fiscal excesses if they strike a good balance between simplicity, flexibility, and enforceability. 

Annette Alstadsæter, Niels Johannesen, Gabriel Zucman, 09 May 2018

Tax records are often used to gauge the concentration of wealth and income in a society. However, if the rich dodge taxes more than the poor, tax records will underestimate inequality. This column uses Scandinavia as an example to demonstrate how tax evasion varies with wealth: the top 0.01% richest households in Scandinavia evade about 25% of the taxes they owe by concealing assets and investment income abroad. The very rich are able to do this simply because they have access to wealth concealment services. To reduce top-end evasion, what is essential is to shrink the supply of such services.

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