Progressive Tax Research Articles

Rethinking social assistance amid the COVID‐19 pandemic: Guaranteeing the right to income security in Ecuador

AbstractIn the face of increased uncertainty and a slow economic recovery, it is crucial to protect populations from the effects of systemic crises beyond the narrow goal of poverty reduction. In Ecuador, social assistance programs had little effect in reducing earnings losses caused by the COVID‐19 pandemic, leading to a renewed discussion on the implementation of a universal basic income (UBI). This study evaluates the potential impact of social assistance reforms using tax‐benefit microsimulation techniques. Four simulated counterfactual reforms are assessed, ranging from an extension of current social assistance programs to the implementation of UBI, which would replace existing programs and be partially funded through progressive personal income tax and social security contributions. Our findings demonstrate that poverty and inequality would decrease significantly under the more generous UBI scenarios. This research contributes to the ongoing debate on the potential benefits of UBI in reducing poverty and inequality and emphasizes the importance of considering alternative social assistance reforms in the face of growing systemic challenges.

Tax progressivity and output in the US

Compared to the economic effects of tax rates, those of tax progressivity have benefited much less from the recent Renaissance in fiscal research. In this letter, we use a novel data set on US tax progressivity constructed by Borella et al. (2022) to estimate its output effects since 1970. Our results show that tax progressivity reduces the economy's growth rate temporarily and the level of income per capita permanently. Both effects are sizable, statistically significant, and robust to various specifications and to controlling for changes in the tax rate.

Arbitrage and non-linear taxes

AbstractIncorporating a progressive income tax into an economic decision problem raises the question whether this tax does not create arbitrage opportunities. We investigate this problem in a riskless (multi-period) economy. With a convex tax function we identify a particular kind of arbitrage (called bounded arbitrage): In this case the gain achievable through arbitrage trade is limited and cannot reach infinity.We are able to give a complete characterisation based on prizes of the traded assets as to whether bounded as well as unbounded arbitrage opportunities will exist.

Intertemporal Income Shifting and the Taxation of Business Owner-Managers

Abstract We use newly linked tax records to show that the large responses of UK company owner-managers to personal taxes are due to intertemporal income shifting and not to reductions in real business activity. Around half of this shifting is short-term and helps prevent volatile incomes being taxed more heavily under progressive personal taxes. The remainder reflects systemic profit retention over long periods to take advantage of lower tax rates, including preferential treatment of capital gains. We find no evidence that this tax-induced retention increases business investment. It does, however, substantially reduce the tax revenue raised from high income business owners.

MACROECONOMIC IMPACTS OF PERSONAL INCOME TAX IN THE CONTEXT OF INCLUSIVE DISTRIBUTION OF INCOME AND OVERCOMING INEQUALITYV

The article examines the issues of the generation and distribution of labor income in the Republic of Armenia in the context of the experience and witnessed results of the application of various personal income tax regimes, particularly flat and progressive taxation systems. Based on the analysis of official statistics, main trends of inequality were observed, based on a number of tools used in scientific analysis: the Gini and Palma coefficients, as well as the Theil index. From the results of the study, it was found that the level of inequality in the country has decreased to some extent in the last two decades. At the same time, within the framework of the research, a simulation analysis was carried out and the methods of calculating the Lorenz curve and the Gini coefficient from the wellknown theoretical approaches to inequality assessment were applied in the case of flat and progressive taxation, using the personal income tax database of the RA State Re-venue Committee. Based on this method, as a result of the analysis, it was found that only the progressive taxation system has a certain positive impact in terms of alleviating in-come inequality, while the effect of flat taxation is insignificant.V

Tax Reforms in Bangladesh: An Overview

In both industrialized and emerging nations, tax reform is a subject that requires ongoing attention. This topic is discussed in terms of creating a suitable tax base, bolstering tax administrations, and guaranteeing equity, efficiency, and progressive taxation. Throughout the past forty years, Bangladesh has implemented numerous reform measures. Since there isn't much research on business matters related to these initiatives in the context of Bangladesh, this study aims to review those initiatives by emphasizing them. This study uses strategies for conducting interviews as well as content and document analysis. According to the study, the results of those reforms are not all that positive. While there are still notable shortcomings in enforcement, audit, and compliance, there are also some notable successes, such as the creation of the Large Taxpayers Unit (LTU) and Central Intelligence Cell (CIC) and the digitization of the tax process. The revenue implications of tax reforms indicate a somewhat improving trend in both direct and indirect tax collection, with extremely gradual progress being seen in the overall tax-to-GDP ratio. It would be wise to investigate incentive programs to recognize prompt compliance and commend tax officers for their achievements. Since there hasn't been a thorough reform attempt in the corporation taxes space in almost ten years, we urge the launch of a new, comprehensive reform initiative that addresses all of the impending issues. Designing of tax policy that promises professional administration and induces adequate compliance remains a major challenge for public finance in developing countries.

Income Inequality and Household Saving in Kenya

Household saving in a country is a critical source of funding to its investments especially in a developing economy like Kenya. Household saving emerges as an integral part towards national saving level in that country. Currently, Kenya’s national saving stands at 12% of its Gross Domestic Product and over the past three decades, Kenya has shown a declining trend in gross domestic savings since it was at 23% of Gross Domestic Product in the early 1990s and dropped to 12% in the early 2020s. This declining saving rate could be explained by the country’s level of income inequality which also has detrimental effects on economic growth as well as the poverty reducing effects of a growing economy. Kenya has been having a declining rate of income inequality portrayed by the declining Gini indices. This study proposed to investigate the effects of income inequality on household saving rate in Kenya. This study used cross-sectional financial data collected from Fin Access Household Survey of 2021. Data analysis involved descriptive statistics, diagnostic tests, and probit regression analysis. The study findings were that income inequality had a negative effect on the likelihood of a household to save. This study recommends the government to intervene in addressing the issue of high income inequality through tailormade interventions like progressive taxation, minimum wage and labor policies, and equal access to quality education.

Progressive Taxation for Extractive Industries: Summary of a Thesis on Reconciling the Progressive Mineral Taxation Regime of Papua New Guinea

Progressive Taxation for Extractive Industries: Summary of a Thesis on Reconciling the Progressive Mineral Taxation Regime of Papua New Guinea

Monopsony Amplifies Distortions from Progressive Taxes

Monopsony Amplifies Distortions from Progressive Taxes

Análisis comparativo de las reformas tributarias para el cálculo del impuesto a la renta de personas naturales bajo relación de dependencia

This investigation examines the evolution of Income Tax payments for individuals engaged in dependent employment in Ecuador over the years 2021, 2022, and 2023. Utilizing a descriptive and quantitative methodology, the study conducts a comprehensive review of the tax reforms enacted during this period, emphasizing the Organic Law of Simplification and Tax Progressivity, the Organic Law for Economic Development and Fiscal Sustainability post-COVID-19 pandemic, and the Family Economy Strengthening Law. The research centers on the impact of these reforms on the computation and payment of income tax, specifically addressing the elimination of personal expense deductions and the introduction of new rebates linked to the basic family basket and family dependents. The findings indicate a substantial increase in the tax liability for the year 2022 relative to 2021, attributed to the removal of deductions. Conversely, in 2023, the implementation of new rebates significantly mitigated the tax burden, particularly for taxpayers with family dependents. This analysis underscores the critical role of fiscal policies in ensuring the equity and efficiency of the tax system, providing a robust foundation for future reforms aimed at enhancing fiscal sustainability and taxpayer welfare.

Estimating the effect of Progressive Personal Income Tax Schedule for Russia in a global CGE-OLG model

Estimating the effect of Progressive Personal Income Tax Schedule for Russia in a global CGE-OLG model

Accelerating Battery Electric Vehicle Program through Progressive Carbon Tax and Collection Scheme

Accelerating Battery Electric Vehicle Program through Progressive Carbon Tax and Collection Scheme

Appendices to Progressive Taxation for the World

Appendices to Progressive Taxation for the World

Сценарная оценка макроэкономических эффектов прогрессивного налогообложения в России

The purpose of the study is to assess the impact of alternative options of progressive taxation on Russia’s macroeconomic performance. For quantitative assessments, a neoclassical general equilibrium model with heterogeneous households subject to idiosyncratic income shocks was used. Three groups of scenarios were analyzed, setting a threshold progressive tax scale with thresholds of 30, 50, and 70 thousand rubles, under which state income tax revenues (1) grow, (2) remain unchanged, and (3) decline. The maximum personal income tax rate in the analyzed scenarios was 25%. Steady states and transitions were calculated for the scenarios. According to the quantitative estimates, the first reform leads to a loss of 0.3% to 1.3% of GDP in the long run, depending on the assumed rates and threshold. Despite the increase in lump-sum transfers, aggregate household consumption decreases by 0.5–1.7% in all cases. The second reform leads to a loss of 0.2% to 0.6% of GDP in the long run. The third reform leads to insignificant fluctuations of GDP within 0.1%: GDP increases at the threshold of 30 thousand rubles and decreases at other thresholds. The scale of inequality reduction, as measured by the Gini coefficient, increases with an increase in the top tax rate. However, as the threshold increases, the depth of the Gini index reduction first increases and then decreases. In the short run, there is upward pressure on wages and prices. This is because a decrease in labor supply with unchanged capital in the short run leads to an increase in wage rates (a shift along the labor demand curve), and an increase in wage rates means an increase in marginal costs for firms, leading to higher prices.

НАЛОГОВОЕ АДМИНИСТРИРОВАНИЕ НДФЛ В СОВРЕМЕННЫХ ЭКОНОМИЧЕСКИХ УСЛОВИЯХ И ЕГО ПЕРСПЕКТИВЫ

The article is devoted to the changes that will affect the personal income tax in the near future. At the legislative level, they take the initiative to use this tax as an instrument of a fair, socially oriented state policy. On the one hand, the main function of taxes is fiscal, and they should serve as a source of stable financial revenues to the budget system of the Russian Federation, on the other hand, the personal income tax is designed to perform a social function. The experience of introducing a progressive scale of taxation – a 13% tax rate for incomes not exceeding 5 million rubles and 650,000 rubles + 15% from exceeding 5 million rubles was recognized as successful, personal income tax receipts are steadily growing. To date, various options are being considered for both the step of the progression itself and the initial amount of total income from which the application of the progressive scale will begin. A stable increase in tax revenues from the personal income tax and the implementation of a socially oriented state policy can be achieved with a competent tax policy, where not only a progressive tax scale is introduced, but also a bundle with a non-taxable minimum works.

Effective salary policy as a component of the development strategy

The inefficient distribution of income in society creates a number of problems, the main of which are the following: approved social standards are at least two times lower than the actual value of the minimum consumer basket, half of the Pension Fund's income is formed at the expense of subsidies, and half of the country's households need subsidies to pay for housing and communal services. As a result, there is no solvent demand for goods and services on the market, which slows down the socio-economic development of the state. The need for radical improvement of the principles of income distribution in society determines the relevance of the research topic. The task is to determine the legal means of effective distribution of income in order to accelerate the socio-economic development of the state. The drivers of economic growth based on wages and/or profits of enterprises are analyzed. However, none of the possibilities will be realized in the absence of a stable or at least predictable exchange rate of the hryvnia, a progressive income tax system and fair market prices. The socialist ideology of the connection of wages with labor productivity, which is equated with labor intensity, does not allow to implement the optimal distribution of incomes and restrains the socio-economic development of the state. Labor productivity is determined by the level of production equipment and technology, the progressiveness of technological processes, the use of innovative materials, the introduction of patents and know-how, etc., which provides for higher qualification of personnel and higher wages and determines the direction of using the received profits and attracting investments. The regulator of the use of profits is the tax system and progressive tax rates. Income distribution in society should be determined by acceptable social standards and ensured by the application of progressive personal income tax rates. Amendments to the Tax Code of Ukraine have been proposed, which will ensure the solution of the set tasks

The politics of redistribution and sovereign default

This paper studies how distributional and electoral concerns shape sovereign default incentives within a quantitative model of sovereign debt with heterogeneous agents and non-linear income taxation. The small open economy is characterized by a two-party system in which the left-wing party has a larger preference for redistribution than the right-wing party. Political turnover is the endogenous outcome of the electoral process. Fiscal policy faces a tradeoff: On the one hand, the government has incentives to finance its spending via external debt to avoid distortionary income taxation. On the other hand, the accumulation of external debt raises the cost of borrowing. Quantitative findings suggest that the left-wing party implements a more progressive income tax, is more prone to default, and has a lower electoral support than the right-wing party due to worse borrowing conditions and the distortionary effects of income taxation. In equilibrium, electoral uncertainty raises sovereign default risk.

Statutory Corporate Tax Rates and Income Distribution — Panel Data From 95 Countries Using Driscoll and Kraay Standard Errors and Quantile via Moments

The study uses the statutory corporate tax rate to explain before and after tax and transfer income distribution. The unbalanced panel has 95 countries from 1988 to 2018. The study uses Driscoll & Kraay standard errors and Quantile Via Moments. The study finds higher corporate tax rates appear to lessen income inequality in most cases, small coefficients suggest it is minor and insignificant for after-tax and transfer income distribution in developed countries. Furthermore, in an augmented model with fewer observations spanning 1988 to 2005, the average rate of personal income tax progressivity significantly reduces net income inequality while the statutory corporate tax rate is insignificant. Therefore, findings may indicate increases in personal income tax rate progressivity may be more effective policy tools than changes in statutory corporate tax rates to moderate growing income inequality.

Inflation and finance

The study concentrates on the discussion in Hungary about the causes of contemporary inflation: what are the main causes of it and how to rank them. It tries to establish whether the simple methods of monetary policy are appropriate to stop inflation. The method of the study is an overview of recent professional articles and the analysis of the data of Central Statistical Office publications. It concludes that the Hungarian inflation has several internal and external causes: uncovered spending power especially in time of the COVID epidemic, the growing energy prices because of the Ukrainian war, money retention for Hungary in Brussels, the inadequatetiming of monetary policy actions, the role of imbalance of payments and exchange rates evolution – direct and indirect impulses-, the role of inherited state debts and the accumulated wage distortions which is now to correct, and the tax policy which relies mainly on VAT. The conclusion of the study is that only by autonomous monetary policy actions cannot deal with inflation, because the national policy cannot get rid of the international money markets. It is time to change the tax policy for a more structured one relying on the progressive income taxes.

Taxation Perspectives: Analyzing the Factors behind Viewing Taxes as Punishment—A Comprehensive Study of Taxes as Service or Strain

This research paper delves into the intricate relationship between taxpayers and taxation systems, seeking to understand the factors influencing individuals’ perceptions of taxes as either a service or a financial burden. The study employed online surveys to collect data from a diverse group of participants, using both quantitative and qualitative research methods. The research findings demonstrate that people’s perceptions of taxes are not solely shaped by economic factors but are also influenced by psychological aspects, government communication, and societal norms. In economically developed countries, citizens tend to have more positive tax perceptions due to the visible benefits of their tax contributions. In contrast, less developed nations often see negative perceptions rooted in the lack of apparent returns on taxes paid. Additionally, the fairness of tax policies and government communication significantly impact how taxes are perceived. This research provides insights for policymakers on how to enhance tax compliance and improve taxpayer–government relations. It suggests that progressive and fair tax policies can lead to higher compliance rates and increased revenue collection. Furthermore, simplifying tax systems and reducing bureaucratic obstacles can make tax compliance more accessible and less burdensome. The study also offers international case studies for best practices that can be adapted to different contexts. This study sheds light on the multifaceted nature of tax perceptions and their impact on economic behavior. It underscores the importance of considering both economic and psychological factors, as well as government policies and communication, in shaping taxpayers’ views on taxation.