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Half of the jobs in the U.S. feature pay-for-performance. We study nonlinear income taxation in a model where such contracts arise in private labor markets that are constrained by moral hazard frictions. We derive novel formulas for the incidence of arbitrarily nonlinear reforms of any given tax code on both the mean of earnings and their sensitivity to performance. We show theoretically and quantitatively that, following an increase in tax progressivity, the higher performance-sensitivity caused by the crowding-out of insurance provided by firms is almost fully offset by a countervailing “performance-pay effect” driven by labor supply responses. As a result, earnings risk is hardly affected by policy. We then turn to the normative analysis of a government that levies taxes and transfers to redistribute income across workers with different levels of uninsurable productivity. We find that setting taxes without accounting for the endogeneity of private insurance is close to optimal. Thus, the common concern that standard models of taxation underestimate the cost of redistribution is, in the context of performance-based compensation, overblown.

Recognizing the importance of the second-best nature of economies, the Stern–Stiglitz report on carbon pricing departed from the recommendation of a single carbon price for all uses at all places and times. This paper provides some of the analytics behind these recommendations. First, I analyze the circumstances in which distributional concerns make desirable a tax or regulation inducing significant reductions in carbon usage in a carbon-intensive sector for which consumers are disproportionately rich. Such policies allow lower carbon prices elsewhere without exceeding carbon emission targets. The cost of the resulting production inefficiency may, under the identified circumstances, be less than the distributional benefits. The paper considers the circumstances in which such differential policies may be best implemented through regulation vs. differential pricing, as well as differential effects on political economy and norm setting. Second, I consider the effect of carbon price trajectories on induced innovation, providing general conditions under which the optimal carbon path should, at least eventually, be falling over time. Finally, I revisit the price-versus-quantity debate and highlight important aspects of the dynamic nature of the problem.

In the context of the German energy transition, the financial burdens associated with subsidies for renewable energies have increased substantially in recent years. These costs are passed on to consumers in the form of the EEG levy as a component of the electricity price. However, some households benefit from owning photovoltaic (PV) systems because they receive the corresponding feed-in tariffs. In order to investigate how the benefits (and burdens) of this subsidization scheme are distributed, we use micro-data from SOEP for private households during the period of 2010–2017, and we employ three different inequality metrics – the Gini coefficient, the Theil index and the Atkinson index. We conclude that subsidy costs are almost evenly distributed among the population and are therefore regressive. At the same time, feed-in tariffs are increasingly flowing into higher-income households because PV systems are more prevalent in these households. We estimate the overall impact of this subsidization scheme on several measures of (income) inequality at 1.0–2.4%, most of which is due to the EEG levy. We also find regional distortions in favor of the South and especially at the expense of the East.

We examine the spatial, county-level incidence of changes to tourist tax rates in Florida from 2003 to 2014. Florida allows county-level visitor tax increments to fund various tourism-related initiatives. As a result, there is considerable variation in visitor tax rates across counties and across time. Using a dynamic spatial autoregressive panel model, we show that direct and indirect effects of room tax rate changes on taxable hotel room expenditures are relatively small and largely exported to visitors. Because these taxes have recently been allowed for funding Major League Baseball Spring Training facilities, we also test whether these facilities impact hotel tax collections. We find no measurable effects of a small number of facility relocations on hotel spending in the new or previous home-counties. We also discuss the importance of considering contiguous spillovers and the use of cluster-robust standard errors in panel estimation of tax incidence for tourism.

Funding Information: We thank two websites displaying volunteer-reported fuel prices, tankkaus.com and polttoaine.net, for providing the data for this study. We are grateful for funding from the Strategic Research Council at the Academy of Finland , grant nos. 335559 and 335560 . Tuomas Kosonen is grateful for funding from the Academy of Finland , grant no. 299373 . Publisher Copyright: © 2022 The Authors We use station-level price data and a significant diesel fuel carbon tax reform to study who bears the economic burden of fuel carbon taxes. We use a difference-in-differences strategy to estimate the pass-through of the large carbon tax increase to retail prices, where we compare retail diesel prices faced by private motorists to retail gasoline prices. We find that on average fuel carbon taxes are less than fully passed through to consumer prices, which suggests that consumers and the supply chain split the burden of these taxes. Using information on station location, we match price observations with postcode-level average incomes and measures of urbanization, and show that there are significant differences in the pass-through rate across areal incomes and between rural and urban areas up to one year after the reform. The effect of fuel carbon taxes on consumer prices decreases with areal income and with the degree of urbanization.

I study the effects of a tax on ride-sharing trips in Chicago, which was nominally motivated by a desire to reduce congestion, but which also affected competition between ride-sharing platforms and traditional taxis. I find that platforms passed through more than 100% of the tax to consumers taking single rides, but there was incomplete pass-through to shared rides. This pattern can be explained by the two-sidedness of the market. The tax shifted demand back to taxis, but only in the downtown area, where competition is more intense. Finally, I find that the tax did not significantly reduce congestion and a simple calibration suggests that it lowered consumer surplus by over $300,000 per day.

This paper studies the implications of monopsony power for optimal income taxation and welfare. Firms observe workers' abilities while the government does not and monopsony power determines what share of the labor market surplus is translated into profits. Monopsony power increases the tax incidence that falls on firms. This makes labor income taxes less (more) effective in redistributing labor income (profits). The optimal tax schedule is less progressive. Monopsony power alleviates the equity-efficiency trade-off that occurs because the government does not observe ability, but at the expense of exacerbating capital income inequality. I illustrate these findings for the US economy.

Within a rich dynamic environment I derive a robust and testable condition for the optimality of capital income tax rates. I apply this condition to US data. Endogenous responses of factor prices mitigate welfare gains of capital tax increases for a large fraction of the population, who derives most of its disposable income from net wages. However, due to a positive revenue impact, the same price responses amplify the welfare gains of the very bottom of the income distribution, whose main income source are government transfers. As a consequence, general equilibrium forces may increase the optimal capital tax rate relative to its exogenous price counterpart, contradicting conventional wisdom.

We study the incidence of capital income taxation in a dynamic general equilibrium model with heterogeneous firms and lifecycle households. In this incomplete market setting, marginal excess burdens of three capital taxes, namely corporate income, dividend and capital gains taxes, are vastly different due to heterogeneous responses of firms and households, and heterogeneous effects of general equilibrium adjustments. Overall, taxing capital with a corporate income tax at the firm level results in higher excess burden than taxing capital with dividend and capital gains taxes at the household level. Given the salient features of the 2013 U.S. tax system, reforms that shift tax burden from the firm to household side potentially result in aggregate efficiency gains and overall welfare improving. However, the welfare benefits of these tax reforms are quite different across households and generations over transition, depending on skill type, age-cohort and government budget balancing rule. Thus, our findings highlight the importance of accounting for firm and household heterogeneity when analyzing the aggregate and distributional effects of capital income taxation.

We use Nielsen Homescan data to examine whether the incidence of excise taxes on menthol cigarettes varies with race. We find that taxes are shifted at significantly lower rates to Black smokers of menthol cigarettes than any other smokers. A potential explanation is that Black menthol smokers have lower search cost owing to targeted marketing and promotions. We find evidence that Black smokers receive significantly more price discounts for menthol products than white menthol smokers. Our results are robust across product types (packs and cartons), product qualities (generic and premium cigarettes), and cross-state tax avoidance. Our findings indicate that increasing cigarette taxes may be ineffective in reducing racial disparities in menthol cigarette use and smoking-related diseases, and that restricting the sale of menthol cigarettes may provide an alternative to cigarette taxation.

Stamp duty is a core part of the Australian tax system, but large components of its effect on the economy are unknown. In particular, the distribution of stamp duty's costs are not well understood. This has been hampered by a lack of quantitative studies of stamp duty's costs, and by limited discussion of stamp duty's effect on rental markets. This paper addresses this gap by establishing a theoretical framework for understanding stamp duty's incidence, and then by estimating the distribution of its costs. We find that stamp duty is a regressive tax, and that this regressiveness is predominantly due to the fact that housing costs are a significantly higher share of household income in low income households. We also find that the economic incidence of stamp duty is not particularly relevant to interrogations of how costs are distributed, because (unlike in many other markets), most people who sell housing tend to purchase houses of a similar value within a short time period of selling. We also provide some thoughts on current reform proposals and then discuss how land taxes could be designed in light of political barriers.

We analyze the welfare implications of property taxation. Using a sufficient statistics approach, we show that the tax incidence depends on how housing prices, labor and other types of incomes as well as public services respond to property tax changes. Empirically, we exploit the German institutional setting with 5,200 municipal tax reforms for identification. We find that higher taxes are fully passed on to rental prices after three years. The pass-through is lower when housing supply is inelastic. Combining reduced form estimates with our theoretical framework, we simulate the welfare effects of property taxes and show that they are regressive.

We exploit variation in National Insurance contributions (NICs) – the UK’s system of social security contributions – and a large panel dataset to examine the effects of 35 years of employee and employer NICs reforms on labour cost (gross earnings plus employer NICs), hours of work and labour cost per hour, both immediately (0–6 months) after reforms are implemented and in the slightly longer term (12–18 months). We consider assumptions under which the estimated coefficients on net-of-marginal and net-of-average tax rates in a panel regression can be interpreted as behavioural elasticities or as reflecting incidence. We find a compensated elasticity of taxable earnings with respect to the marginal rate of employee NICs of about 0.2–0.3, operating largely through hours of work, while that with respect to the marginal rate of employer NICs is not statistically significantly different from zero. We also find that labour cost falls by a much larger amount when the average rate of employer NICs is reduced than when the average rate of employee NICs is reduced, which is consistent with the economic incidence of NICs being strongly affected by its formal legal incidence. Estimates from the hours and hourly labour cost regressions provide further support to this interpretation of the findings, and also suggest the presence of substantial income effects – though also, after 1999, a puzzling effect of average employer NICs rates on hours of work. Each of these results remains true after 12–18 months (if anything, coefficients on lagged changes in NICs rates strengthen these findings), implying that any shifting of employer NICs changes to the individual employees concerned (and vice versa for employee NICs) does not begin over this time horizon. These results are similar to those found by Lehmann et al. (2013) for France but represent an extension of that work by considering hours as well as labour cost responses and second-year as well as immediate effects.

To investigate the efficacy and efficiency of environmental taxes, I analyze the rate at which taxes on motor gasoline are passed to consumers by estimating two cointegrating vector autoregression models for each of six states. For state models that specify the retail price of motor gasoline without taxes, exclusion tests suggest that taxes on motor gasoline are not passed to consumers on a one-for-one basis. For state models that specify the retail price of motor gasoline including taxes, results indicate that taxes are passed to wholesale prices in Florida and Massachusetts on a one-for-one basis and are passed to retail prices with a ‘mark-up’ in Florida, Massachusetts, New York, and Ohio, and are not fully passed through in Washington. State-specific rates of pass-through differ from results suggested by theory and fixed effects estimators, which may be biased by the presence of nonstationary data and the assumption that the rate of pass through is the same across states. Rates of pass through greater than one transfer $12.2 billion from consumers to retailers in FL, $2.3 billion in MA, and $19.2 billion in NY during the sample period, which represent 10.7%, 6.0%, and 23.9% of total expenditures on regular motor gasoline.

Economists argue that land rent taxation is an ideal form of taxation as it causes no deadweight losses. Nevertheless, pure land rent taxation is rarely applied. This paper revisits the case of land taxation for developing countries. We first provide an up-to-date review on land taxation in development countries, including feasibility and implementation challenges. We then simulate land tax reforms for Rwanda, Peru, Nicaragua and Indonesia, based on household surveys. We find that (i) land taxes provide a substantial untapped potential for tax revenues at minimal deadweight losses; that (ii) linear land value taxes tend to put a high relative burden on poor households as land ownership is pervasive; (iii) non-linear tax schemes could avoid adverse effects on the poor; and that (iv) with technological advances, administrative costs of land taxes have reduced substantially and are outweighed by tax revenues and co-benefits of formalized land tenure. Enforcement and compliance remain, however, a key challenge.

This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market.

We quantify marginal excess burden, defined as the change in deadweight loss for an additional dollar of tax revenue, for different taxes. We use a dynamic general equilibrium, overlapping generations model featured with heterogeneous agents and a realistic structure of corporate finance and taxes. Our main results, based on an economy calibrated to Australian data, indicate that company taxes are more distorting than personal income and consumption taxes. Specifically, the marginal excess burden for the company income tax is 83 cents per dollar of tax revenue raised, compared to 34 cents and 24 cents for the personal income and consumption taxes, respectively. A broader analysis of more tax instruments confirm that the relatively larger excess burden of company taxes ultimately falls on households. Importantly, the marginal excess burden is distributed unevenly across skill types, generations and ages. This highlights political challenges when obtaining popular support for raising taxes. Hence, our analysis demonstrates that marginal excess burden can be a useful tool for evaluating both efficiency and distributional implications of a tax increase at the margin.

This paper studies commodity taxation in a model featuring heterogeneous consumers, imperfect competition, and tax salience. We derive new formulas for the incidence and marginal excess burden of commodity taxation, and we find that tax salience and market structure interact when considering tax incidence but do not directly interact when considering the marginal excess burden. We estimate the necessary inputs to the formulas by combining Nielsen Retail Scanner data from grocery stores in the US with detailed sales tax data. We calibrate our new formulas and conclude that the incidence of sales taxes on consumers is increasing in tax salience, and the marginal excess burden of taxation is larger than standard formulas that ignore imperfect competition and tax salience. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

As the nation is experiencing the need for ever-increasing government expenditures to address COVID-19 disruptions, rebuild the nation’s infrastructure, and many other worthy causes, conventional thinking calls for restoring at least a portion corporate taxes eliminated by the 2017 Tax Cuts and Jobs Act, especially from progressive circles. In this working paper, Edward Lane and L. Randall Wray examine who really pays the corporate income tax and argue that it does not serve the purposes most people believe. The authors provide an overview of the true purposes and incidence of corporate taxation and argue that it is inefficient and largely borne by consumers and employees, not shareholders. While the authors would prefer the elimination of the corporate profits tax, they understand the conventional thinking that taxes are necessary to help finance government expenditures—even if they disagree. Accordingly, the authors present alternatives to the corporate tax that shift the burden from consumers and employees to those who benefit the most from corporate success.

We develop a model to investigate the relations among (1) corporate tax incidence, (2) tax capitalization, and (3) implicit corporate tax in a competitive equilibrium. The economic pretax return is independent of whether the incidence of the corporate tax is shifted from shareholders to non-shareholders, such as customers or workers. However, tax incidence does affect the pretax accounting return, because the denominator of the return measure reflects the historical cost of the firms' assets and is often measured using prior year book values. To the extent a tax rate change changes the fair values of corporate assets (i.e., tax capitalization), the corporate tax affects pretax economic returns but not pretax accounting returns. The implicit tax rate for corporations reflects differences in corporate tax rates but is independent of pretax accounting returns.

Legislators often attach specific names to individual taxes to promote their purpose, increase transparency, and ease public backlash over tax increases. While having political benefits, does the simple act of naming and promoting a tax for a specific purpose have a more meaningful effect in the marketplace? Do consumers respond differently to tax-induced price increases depending on the name and purpose of the tax? In this article, a natural experiment is used to compare consumer responsiveness and tax incidence after the introduction of two new gasoline taxes in Alberta if: 1) an increase in the generic excise tax and 2) an environmentally-targeted "carbon levy". While similar in magnitude, the taxes were very different in name, purpose, and transparency. Results show that the naming and marketing of a tax can indeed matter if responses were lower and incidence higher for the carbon levy than the less transparent excise tax. Implications are discussed.

We investigate tax incidence reflected in the pricing of syndicated loans and argue that loan spread increases in bank income taxes of borrowers’ home states. We compare borrowers in states with differing bank tax rates and demonstrate the presence of tax incidence on borrowers with causality coming from bank taxes. Tax incidence on borrowers increases with local loan market concentration and pre-existing lending relationships. Further, a lack of tax deductibility of loan loss provisions enhances tax incidence. We conclude that bank income taxation, though specifically targeted at banks, is partially passed through to borrowers and increases their cost of debt.

Endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence. We develop a model with product upgrades and costly bargaining and find that tax rate pass-through only partially characterizes the welfare impact of taxation; consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort. We apply the insights of our theory to the study of subsidies for green goods, specifically hybrid electric vehicles in Canada. We utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification. Our baseline estimate finds that prices rises by $570 for every $1000 increase in the subsidy. But, this pass-through estimate substantially underestimates consumer gains because a majority of this price increase ($459–≈ 80%) is due to increased product quality in the form of additional options and features.

Legislators often attach specific names to individual taxes to help explain their purpose, increase transparency, and ease public backlash over tax increases. It may be politically beneficial, but does the simple act of naming a tax and attaching it to a specific set of benefits have an actual effect in the marketplace? Do consumers respond differently to tax-induced price increases depending on what that tax is? In this article, a natural experiment is used to evaluate tax incidence after the introduction of two gasoline taxes in Alberta - 1) an increase in the generic excise tax and 2) an environmentally-targeted “carbon levy”. While similar on the cost side, the taxes were very different in name and transparency on the benefit side. Results show that benefit-side transparency can matter – responses were lower and incidence higher for the more transparent carbon levy than with the less transparent excise tax.

This paper investigates the shifting of sales taxes to consumers through retail prices in the short run. Retail data on gasoline prices are used at the station level within the U.S., including observations from all fifty states and the District of Columbia. A difference-in-differences approach is employed to identify the short-run effects of the changes in state taxes as of January 1st, 2015, when five states have increased their gasoline sales taxes, while five other states have decreased theirs. States experiencing such changes in sales taxes (between December 31st, 2014 and January 1st, 2015) are analyzed as the treatment group of a natural policy experiment, where the control group consists of states with no changes in their sales taxes. The results show that both sales-tax increases and decreases are under-shifted to consumer prices, although the under-shifting of sales-tax decreases is much higher (i.e., the asymmetric incidence of sales taxes). The pass-through measures also differ significantly across states, showing the importance of having a nationwide analysis. The results are robust to the consideration of retailer characteristics, wholesale prices, retail brand effects and hourly price changes within each day.

Sugary drink consumption is an important contributor to the current global epidemic of obesity. In recent years, 50 countries or jurisdictions have implemented taxes on sugary drinks as an instrument to discourage consumption. Against the tide, Brazil reduced taxes on these beverages in 2017 and 2018. However, a recent debate - raised by the federal government - has started over taxation of sugary and alcoholic beverages (sin taxes). The effectiveness of this policy will depend on how the taxes are transferred to prices. In this sense, this paper we aim to quantify the impacts of the tax reduction on prices of sugary drinks in Brazil, and therefore to contribute to the debate by calculating the pass-through of taxes to prices of these products in the Brazilian context. We analyze the Brazilian market using a panel data of products, by brand, collected by Euromonitor from 2013 to 2018. Our results suggest that the transfer of taxes to prices depends on the firm size and the type of product, with pass-through rates ranging from 15% to 124%.

How do differences in the motive for conspicuous consumption in the United States and China affect the incidence of taxes in those countries? In this paper I develop a model of conspicuous consumption in which a consumer cares not only about the direct utility she receives from consumption, but also about the way her consumption pattern affects her peer group's belief about her well-being. Estimating the model on American and Chinese data, I find that a Chinese consumer cares 20% more than an American consumer about peer beliefs. I use the estimated model in several experiments related to tax incidence. I find that the 1990–2002 American luxury tax on automobiles led to widespread but small welfare gains, and that the stronger Chinese motive for conspicuous consumption leads to fewer households harmed and larger median welfare gains from a 10% tobacco excise tax.

This paper exploits the introduction of a 75% tax on millionaire employees in France in 2013-2014 to better understand the incidence of top labour earners’ taxation. This tax on employers was implemented for two years only, and was announced as such. I estimate cross-sectional difference-in-differences at the percentile level, relying on matched employer-employee data and the complete panel of household income tax returns. I document that employers bore 55% of the tax initially, but that the removal of the tax in 2015 had an asymmetrical effect, largely benefiting employees through an increase in net wage. Turning to heterogeneity results, the incidence seems to depend on occupations. While football players were not affected by the tax, CEOs bore half of the cost of the tax, but they also demonstrated some avoidance behaviours. These findings support the intuition that employees’ bargaining power plays an important role in the impact of such a tax. Lastly, firms did not demonstrate a major change in their production behaviour at the introduction of the tax.

This paper conducts the first comprehensive review and meta-analysis for estimates of alcohol tax pass-through rates. The review examines data coverage by country; econometric models; and results for under- or overshifting by beverage. Several primary studies indicate substantial over-shifting of alcohol taxes. Median rates also suggest taxes are overshifted. Precision weighted-averages calculated for two samples show beer taxes are overshifted and wine-spirits taxes are fully shifted. Meta-regressions corrected for publication bias indicate, however, that full-shifting of alcohol taxes cannot be rejected for any beverage. Results are useful for alcohol tax policy and future research on tax incidence.

Debates about the taxation of business owners often center around the distributional impacts of these taxes and the degree to which they affect workers. The majority of business income in the U.S. is earned by pass-through businesses and taxed subject to the personal income tax system, yet the existence and magnitude of spillovers from personal income taxation to firm behavior has been difficult to estimate. This paper uses a new linked owner-firm-employee dataset created from administrative tax records to analyze how a recent increase in the top marginal tax rate faced by pass-through business owners affected the compensation of their employees. I use panel difference-in-differences methods to compare the earnings of employees in similar firms but whose owners were differentially exposed to a recent tax increase and estimate that approximately 15 to 18 cents per dollar of new tax liability was passed through to employee earnings. This resulted from lower earnings growth among employees attached to their firms, not compositional changes in employment. These results show behavioral responses to the business income taxation embedded in the personal income tax system and imply that the incidence of the personal income tax was not fully borne by those directly subject to the tax change.

In this paper, I review the empirical literature in the intersection of banks and corporate income taxation that emerged over the last two decades. To structure the included studies, I use a stakeholder approach and outline how corporate income taxation plays into the relation of banks and their four main stakeholders: bank regulators, customers, investors and tax authorities. I identify six dimension where taxes are important for banks: debt financing, tax incidence, organizational form choices, profit shifting, financial reporting transparency and customers’ tax avoidance. In addition, the studies in this review show that corporate income taxes lead to distortions between debt and equity financing, between on- and off-balance sheet financing, of prices and of investment allocations. My contribution to the literature is threefold: First, I contribute by providing, to the best of my knowledge, a first comprehensive review on this topic. Second, I deduce policy implications from the studies under review. Third, I point to areas of future research in the intersection of bank regulation and tax legislation.

Sales tax holidays are temporary suspensions of tax rates applicable to selected goods. In the United States, sales tax holidays are popular among states during “back-to-school” seasons for educational supplies and new clothing. One motivation for these policies is to provide state assistance to households with children for necessary goods. This paper investigates the distributional impact across income groups on school supplies’ and apparel purchases during these holidays for a panel of nearly 170,000 households from 2004 to 2016. Judging by conventional household income elasticities the tax savings are very progressively distributed. However, we demonstrate tax holidays to be poorly targeted if judged by the intention of arranging transfers to low income households or households with children. For instance, an equivalent cash transfer to households with children and less than $20,000 in income would have a revenue cost of five percent of what is waived by the sales tax holidays.

This paper estimates the effect of sugar-sweetened beverage (SSB) taxes on sugary drink consumption and prices in Berkeley, CA. SSB taxes have gained popularity with policymakers to fight obesity, yet their effects on market outcomes, especially consumption, are still unclear. I use detailed grocery scanner data from treated city Berkeley, CA and control city Boulder, CO between January 1, 2014 and December 31, 2015. My paper uses a triple-differences estimation that interacts manufacturers and treated products to uncover the differential effects that major brand and private label manufacturers might have on prices which in turn affects consumption of their products. Results show that failing to include manufacturers understates the price effect and averages out important consumption substitution patterns. Pepsi and Dr. Pepper pass through over 50% of the tax, Coke passes through 23% of the tax, and private label sugary drink prices do not change. Similarly, including the differential consumption effect by manufacturer shows that small decreases in sales of major brands are offset by an increase in sales of private label products. I discuss potential mechanisms behind these results.

I employ a unique data-set on fueling station locations in the United States and their corresponding retail gasoline prices to estimate how state tax discontinuities affect business location decisions and tax incidence. The analysis shows that the expected number of fueling stations on the low-tax side of a state border is between 20 and 30 percent higher than on the high-tax side. Gasoline consumers bear 75 percent of the fuel tax on the high-tax side, as compared to 100 percent on the low-tax side. The effect of the border on station location and tax incidence disappears with 15 miles of distance. These results provide some of the first estimates of the effect of tax discontinuities at borders on the location choices of retailers, their competitors, and consequences for the pass-through of taxes to prices.

Wage subsidies can be provided directly to the worker, or indirectly by subsidizing the employer; with reduced cost of labor, employers offer higher wages. The standard literature stipulates that this statutory incidence bears no implications for the economic incidence. We propose and test a mechanism by which indirect subsidies lead to higher social welfare. Studies show that workers reciprocate higher wages with higher effort. Indirect subsidies are shifted to the workers as higher wages, leading workers to reciprocate with higher effort and productivity. A controlled laboratory experiment supports our behavioral hypotheses and confirms the behavioral and welfare implications.

A German panel data of vehicle and owner characteristics is used to analyse the incidence of additional carbon taxes. It is shown that an additional carbon tax on fuel used for private transportation is regressive when there is no allocation of tax revenue. When smoothing consumption across time in the face of additional carbon taxes, low income households can reduce the tax burden. When the cost of air pollution is included in the metric for the tax incidence, the tax burden decreases considerably. It is also found that in order to charge drivers for the attributed emissions, carbon taxes need to be set at least at €30 per tonne of CO2 emissions. Moreover, the estimated own price elasticities suggest that an additional carbon tax may fail to induce owners of vehicles with an intense usage to reduce energy consumption. Consequently, carbon taxes need to be designed jointly with other taxes to target heavy polluters.

By using estimates from a Demographically-Scaled Quadratic Almost Ideal Demand System (DQUAIDS), we investigate how the German car fuels tax changes the private households’ CO2 emissions, living standards, and post-tax income distribution. Our results show that the tax implies a trade-off between the aim to reduce emissions and vertical equity, which refers to the idea that people with a greater ability to pay taxes should pay more.

Consumption tax rates targeted at specific sectors are often reformed without any empirical knowledge about the efficiency of these policies. This paper sheds light on tax incidence as well as the efficiency issue, the potential for welfare improving reform, by studying the impact of value added taxes (VAT) on prices and quantities of labor intensive services. I utilize a VAT reform targeted at a specific service sector, which creates a natural experiment set up. The VAT for hairdressing services in Finland was reduced from 22% to 8%, and the previous tax treatment still applied to other labor intensive services. The choice of the treatment and control groups was exogenous to circumstances in Finland, since these groups were selected from a wider European setting. The results suggest that hairdressers cut their prices only by half of what a complete pass-through would have implied, and that there was hardly any adjustment in equilibrium quantity due to the reform. Hairdressers were able to increase their profits significantly. There is important heterogeneity in the results according to firm size.

This paper analyzes the distributional incidence of the excise tax on gasoline in Chile using Household Budget Surveys. The incidence is calculated with respect to both income and expenditure distributions in order to consider the potential differences between transitory and permanent income. The Suits Index is estimated as a measure of the degree of progressivity of the tax, and confidence intervals are calculated using a bootstrap methodology to statistically compare changes in the incidence given changes in the tax. The results show that the tax, contrary to the evidence for several developed countries, is slightly or moderately progressive, with a lower degree of progressivity observed in the calculations based on income than those based on expenditure. The simulation of the 25% reduction in the tax rate implemented in 2008 shows that, in terms of incidence, its effect is to reduce the progressivity of the gasoline tax, which is the opposite of what was sought by the government with this policy.

With the labor supply being flexible, a revenue-neutral increase in the tax progressivity decreases the tax incidence of the rich and increases the tax incidence of the poor if the tax scheme is highly progressive.

Several cities in the U.S. have implemented taxes on sugar-sweetened beverages (SSBs) in an attempt to improve public health and raise revenue. On July 1, 2017, Oakland introduced a tax of one cent per ounce on SSBs. In this paper, we estimate the impact of the tax on retail prices, product availability, purchases, and child and adult consumption of taxed beverages in Oakland, as well as of potential substitute beverages. We collected data from Oakland stores and their customers and a matched group of stores in surrounding counties and their customers. We collected information in the months prior to the implementation of the tax and again a year later on: (1) prices, (2) purchase information from customers exiting the stores, and (3) a follow-up household survey of adults and child beverage purchases and consumption. We use a difference-in-differences identification strategy to estimate the impact of the tax on prices, purchases, and consumption of taxed beverages. We find that roughly 60 percent of the tax was passed on to consumers in the form of higher prices. There was a slight decrease in the volume of SSBs purchased per shopping trip in Oakland and a small increase in purchases at stores outside of the city, resulting in a decrease in purchases of 11.33 ounces per shopping trip that is not statistically significant. We find some evidence of increased shopping by Oakland residents at stores outside of the city. We do not find evidence of substantial changes in the overall consumption of SSBs or of added sugars consumed through beverages for either adults or children after the tax.

Against the backdrop of corporate tax policy changes in India, the paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly unrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000–15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. However, the results vary with different proxies of capital used in the models. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

The paper attempts to measure the incidence of corporate income tax in India under a general equilibrium setting. Using seemingly uncorrelated regression coefficients and dynamic panel estimates, we tried to analyze both the relative burden of corporate tax borne by capital and labor and the efficiency effects of corporate income tax. The data for the study is compiled from corporate firms listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) for the period 2000-15. Our empirical estimates suggest that in India capital bears more of the burden of corporate taxes than labor. Though it is contrary to the Harberger (1962) hypothesis that the burden of corporate tax is shifted to labor rather than capital, it confirms the existing empirical results in the context of India.

In 2012 the state of Washington created a legal framework for production and retail sales of marijuana. Ten other U.S. states and Canada have followed. These states hope to generate tax revenue for their state budgets while limiting harms associated with marijuana sales and consumption. We use a unique administrative dataset containing all transactions in the history of the industry in Washington to evaluate the effectiveness of different tax and regulatory policies under consideration by policymakers and study the role of imperfect competition in determining these results. We use both a reduced form sufficient statistic approach and structural methods to show a number of results. First, Washington's strict cap on firm entry has resulted in retailers with substantial market power. This market power has immediate consequences for both state tax revenue and consumer welfare. Second, because these entry restrictions have caused retailers to behave like local monopolists, the state could substantially increase revenue generated from marijuana legalization by acting as the retailer itself, as it did for alcohol sales until 2012, without a large increase in prices. Third, despite having the nation's highest tax rate at 37%, marijuana in Washington is not overtaxed as many policymakers in other states have argued. The high taxes do not result in lower revenue or a substantial black market. Instead Washington is still on the upward sloping portion of the Laffer curve and the amount of revenue generated by a tax increase is significantly larger due to retailer market power than it would be under perfect competition. Our results suggest there is not widely available black market marijuana competing with legal retail sales. Finally, the high excise tax is primarily borne by consumers and not by firms, and there is a large social cost associated with each dollar raised.

The standard partial equilibrium formula for pass-through substantially mismeasures incidence in the presence of demand or supply interdependencies. We study general equilibrium tax incidence in a perfectly competitive, multiproduct setting. If only one product is taxed, the general equilibrium incidence will always be greater on the consumer than suggested by the standard incidence formula. If the tax changes on multiple related commodities, while maintaining perfect competition, a necessary condition for overshifting is that the related commodities are substitutes. Pass-through greater than one-hundred percent is not sufficient to infer market structure. When empirically estimating pass-through, pass-through estimates capture the direct effect of the tax on the market, the indirect feedback effects resulting from price and tax changes in other markets and taxation of inputs to production. Empirically applying our theory to estimate pass-through in alcohol markets, we show that demand interdependencies and simultaneous tax changes on related products are important.

This study considers the ways in which government, whether through spending programs or regulations, has made it more difficult for people to find their way out of poverty. It argues that when considering new regulations or eliminating existing ones, policymakers should pay more attention to the regressive effects of government, from the way in which it prevents upward mobility to the way in which some policies and programs burden the poor more than other groups. Specifically, it explores the regressive effects of occupational licensure, zoning laws, and other restrictions on operating businesses, as well as the effects of sin taxes. The discussion of occupational licensure includes a small case study of Uber, the ride-sharing platform. If government policy is restricting upward mobility, then policymakers should look more seriously at ways to stop government from harming those seeking to escape poverty.

Taxation is at the heart of citizens’ relationship with the State. Taxes have significant effect on individual population groups, and become an important political tool as well. Nevertheless, although most countries have adopted similar principles for the operation of their tax system, there remain many differences in the way it is implemented. There are a number of variations in the application of value added taxes and other consumption taxes, including different interpretation of the same or similar concepts. This article is focused on the analysis of the opinions of different groups of inhabitants on the size of the value added tax, on the size of the real estate tax, on the issue of complicated system with lots of exceptions, and on the issue of frequent changes in taxes. The analyzed issue is a part of a broader context which has been solved within the project of specific research conducted by the team from the Department of Economics, Faculty of Informatics and Management, University of Hradec Kralove, called “The Causalities of Tax Incidence and the Modeling of Tax Processes”. This project follows another project of specific research called “The Causalities of Tax Incidence”, while the data from this project have been used for the analysis within this article.Most public finance economists acknowledge that nominal tax incidence is not necessarily identical to actual economic burden of the tax, but disagree greatly among each other on the extent to which market forces disturb the nominal tax incidence of various types of taxes under various circumstances.

The effect of tariff evasion on price formations is relevant in understanding the welfare consequence of illicit trades. Previous empirical studies demonstrate that tax evasion reduces the effects of tariffs on equilibrium prices, but admit an alternative explanation: traders bore the incidence. This paper aims to refine the price disparity analysis to allow for that explanation. An application considers the market for imported pork parts in Japan to exploit the variation in tariff rates over time and across products. Using novel data on monthly wholesale prices on narrowly-defined pork products from 2001 through 2012, I find that a widespread evasion nullified safeguard tariffs almost fully. An alternative identification strategy corroborates the evidence on widespread evasion: An upper bound estimate on the total amount of tariffs evaded is 5.5 times as much as the collected revenue. Additionally, the result indicates that a tougher enforcement reduces evasions.

Existing evidence forms a body of "conventional wisdom" on the redistributive impact of fiscal policies that has been recently questioned by more disaggregated analyses. This paper proposes an additional extension to the traditional benefit incidence analysis to explore further the extent to which the conventional wisdom holds, as well as to provide effective guidance in fiscal decision making. The benefit incidence analysis extension includes linking fiscal policies with the concept of equality of opportunities. The paper describes this approach and showcases the application of the proposed "opportunity incidence analysis" to six pilot countries: Liberia, Cote d Ivoire, Zambia, Tajikistan, Thailand, and Paraguay. Three main contributions stand out: first, opportunity incidence analysis complements traditional benefit incidence analysis by applying its mechanics to a more forward looking concept of equal opportunity. Second, opportunities can be used to target public spending with higher precision. Third, micro-simulations can be used to understand the cost-effectiveness of alternative spending interventions that seek to improve equality of opportunities. All of these results complement the diagnosis produced by traditional incidence analysis and provide useful information to guide specific policy decisions.

The paper is the first to evaluate the dividend tax clientele hypothesis using a data set of all domestic stock portfolios in the market. We find that investment funds that face a higher effective tax rate on dividend income than on capital gains tilt their portfolios away from dividend-paying stocks. These investors consequently earn a dividend yield that is about 35 basis points lower than that of investors who are tax neutral between dividends and capital gains (pension funds, unit-linked insurance, life insurance). Consistent with tax rules and charter provisions, we also find that private corporations prefer growth stocks, that foundations exhibit strong dividend preferences, and that partnerships rarely hold stocks portfolios.