Wage Tax Research Articles

Digitalisation and the Future of National Tax Systems: Taxing Robots?

It is generally assumed that already in the next decade, the use of labour-saving robots with implemented artificial intelligence will lead to a dramatic transition of the workforce in almost all sectors of production and services. The ensuing loss of jobs that have traditionally been performed by a human employees is likely to result at least temporarily in reduced wage tax and payroll tax revenues, increasing income inequality and a disruption of the labour market. Against this backdrop, the idea of taxing the use of robots that replace human workforce, or even taxing the robots themselves, has emerged in politics and scholarly writings. Several justifications have been brought forward by its proponents: the robot tax has been regarded, respectively, as a corollary to a soon-to-be-expected concession of civil law personhood to robots, as a tax on imputed income earned by means of the robot, as an equalisation levy to restore the level playing field regarding the taxation of robots and of human workers, as an instrument for economically efficient wage compression between winners and losers of automation among the human workforce, or as a corrective tax to slow down the disruption of the labour market. This paper argues that upon a closer look, the case for taxing robots or their use is relatively weak, though, except when specific conditions are met. There is currently no compelling argument to make robots themselves taxable persons, neither for the purposes of income taxation nor for the purposes of indirect taxes on consumption expenditure. Moreover, significant objections can also be raised regarding suggestions to tax the use of robots. Some of the concepts advanced in literature rely on presumptions that are either conceptually flawed or lack credible empirical support. Other proposals have their merits, but when weighing in on their potential benefits, policymakers will also have to take into account that any tax on robots is liable to result in distortions, complexities, and reduced growth. Besides, proponents of a robot tax tend to underestimate how capital mobility and international tax competition could easily undermine the respective objective of such a tax. As a Pigouvian tax, a robot tax will therefore likely have a very limited field of reasonable application. Regarding income redistribution and revenue raising objectives, the taxation of robots should only be considered as a measure of last resort, and in any event a provisional one. Where politically feasible, priority should instead be given to intensified efforts to tax the return on capital investments and on profits in general, including an adequate taxation of ultimate shareholders. In any event, increasing automation should have implications for the international allocation of taxing rights.

НАПРЯМИ ПОСИЛЕННЯ СОЦІАЛЬНОЇ СПРЯМОВАНОСТІ ОПОДАТКУВАННЯ ДОХОДІВ ФІЗИЧНИХ ОСІБ В УКРАЇНІ

Оподаткування доходів фізичних осіб є одним з найбільших секторів податкової системи. Механізм його оподаткування поширюється на усіх громадян держави, а тому цей податок є дієвим елементом реалізації державної соціальної політики. Однак в Україні на сучасному етапі ця функція податку на доходи фізичних осіб не реалізовується.Саме тому метою статті стало дослідження чинного в Україні механізму оподаткування доходів фізичних і пошук напрямів його вдосконалення з метою посилення соціальної спрямованості цього сектору оподаткування.Податок на доходи фізичних осіб в Україні відіграє важливу роль у наповненні бюджетів різних рівнів. Однак детальне дослідження механізму його функціонування виявило низку проблем, що провокують значне соціальне розшарування населення, знижують рівень плато- і податкоспроможності громадян і сприяють формуванню високого рівня тіньових доходів. Так, у 2010—2016 рр. рівень останні зріс на 22 відсотки.Попри, здавалося б, широку базу оподаткування і лояльну ставку податку на доходи фізичних осіб, в Україні відзначається низький рівень частки податків на заробітну плату у валовому внутрішньому продукті держави, що свідчить про значні обсяги ухилення від оподаткування в цій сфері. Зокрема, 2016 року в Україні він становив 5,8 %, у той час як у країнах Європи — у середньому 18,6 %.Виявлені недоліки сприяли формуванню пропозицій з поліпшення механізму оподаткування доходів фізичних осіб. Так, першим кроком названо приведення показника неоподатковуваного мінімуму до рівня прожиткового мінімуму. Для посилення соціальної функції цього сектору оподаткування слід ввести прогресивну систему ставок податку, виходячи з обсягів отримуваних доходів. Наступним стане врахування коефіцієнта сімейного оподаткування при визначенні бази оподаткування. На підставі вдосконалення окреслених елементів запропоновано механізм поетапного реалізації концепції сімейного оподаткування, що має змінити чинну систему оподаткування доходів фізичних осіб.Запропоновані вдосконалення сприятимуть оптимізації рівня соціального спрямування оподаткування доходів фізичних осіб, підвищенню рівня життя громадян, зниженню рівня тіньового сектору і зростанню доходів бюджетів різних рівнів.

The Death of the Income Tax (or, the Rise of America's Universal Wage Tax)

Recent proposals from Alexandria Ocasio-Cortez (D NY) to raise the top marginal tax rates under the income tax, and from Senator Elizabeth Warren (D Mass), to add a stand-alone wealth tax to the existing mix of taxes, are promising beginnings. They have burst forth from a veritable desert of progressive tax alternatives in the public political discussion. But both sets of ideas suffer from an allegiance to the status quo; both operate within the existing paradigm of nominally attempting to tax “income” and “wealth” – wealth transfers, in the case of the status quo, wealth itself, in the case of Warren’s proposal. This Article examines that status quo to show that the “income” tax is dead, replaced by a universal wage tax in which payroll taxes add on to a wage/income tax to highly, and inescapably, burden labor while wealth is left off the hook of taxation altogether. This Article traces the century-long movement of our tax system from an income tax to a wage tax, culminating, to date, in President Trump’s Tax Cuts and Jobs Act of 2017. Liberals and progressives must change the way they think about tax in order to get non-taxpaying billionaires, such as the President and his son-in-law, to pay anything at all.

TOO CLEVER BY HALF

Some tax reform proposals, including the Hall–Rabushka flat tax and the Bradford X tax, split a conventional VAT into a household wage tax and a business cash flow tax. Supporters of the two-part VAT seek to preserve most of the VAT’s economic advantages while avoiding its regressivity and its politically toxic label in the United States. However, recent experience, culminating in the 2016–2017 discussion of the House Republican blueprint, demonstrates that the two-part VAT has faced severe political challenges due to misperceptions of its rationale and economic effects.

Should the Philadelphia Property Tax Classification System Be Modified?

This article reviews issues related to proposed changes to the Philadelphia taxation system. There are two proposed plans. The City plan proposes modest cuts to the wage tax and to the net income portion of the business income and receipts tax (BIRT). The plan proposed by the Philadelphia Growth Coalition includes larger cuts in these taxes combined with an increase in the property tax on commercial real estate. The increase in the property tax on commercial real estate is intended to make up for losses of revenue from the tax cuts and is proposed to create a property tax classification system in which different classes of property are taxed at different rates. These proposals have been studied by Econsult Solutions (2015), and their findings are scrutinized in this article. Also, this article includes information on the main example of a property tax classification system in Cook County, Illinois, as a cautionary tale.

Optimal unemployment insurance and redistribution

AbstractWe characterize optimal income taxation and unemployment insurance in a search‐matching framework where both voluntary and involuntary unemployment are endogenous and Nash bargaining determines wages. Individuals decide whether to participate as job seekers and if so, how much search effort to exert. Unemployment insurance trades off insurance versus search and participation incentives. We also allow for different productivity types so there is a redistributive role for the income tax and show that a piecewise linear wage tax internalizes the macro effects arising from endogenous wages. Type‐specific lump‐sum taxes and transfers can then redistribute between individuals of differing skills and employment states. Our analysis embeds optimal unemployment insurance into an extensive‐margin optimal redistribution framework where transfers to the involuntarily and voluntarily unemployed can differ, and nests several standard models in the literature.

Welfare-improving Consumption Tax in the Presence of a Wage Tax under Idiosyncratic Returns from Investment and Incomplete Markets

In a standard multi-period model, consumption tax and wage tax are equivalent. I show that when a capital market is incomplete---in the sense that the rates of return from risky investments are idiosyncratic and there is no insurance for such idiosyncratic risk---the introduction of consumption tax in the presence of wage tax improves welfare. This holds true even in the presence of optimal or non-optimal capital income taxes. In the general equilibrium model, the optimal level of consumption tax is determined to balance the benefits of the risk-sharing effect and asset accumulation effect and the costs of postponing government revenue to later periods.

Re-Employability of Older People in Khon Kaen Municipality (KKM)

The employability of older people is a key issue worldwide due to changing demographics. This study aimed to investigate employers’ demand for re-employing older people, specifically in two major areas: 1) the current employers’ behavior or experience as well as attitude towards older employees, and 2) what will stimulate the employment of older people. The data were gathered by face-to-face interviews employing a structured questionnaire from 301 owners of or the CEOs of business establishments in Khon Kaen Municipality (KKM), Thailand. These were selected from business establishments in KKM proportionally via a stratified sampling procedure, by business sector, legality classification and size. More than half of those businesses with older employees were pleased with them, larger manufacturing businesses retain most of the older employees, and no indication was found that these employers discharge their employees even if they reach official retirement age, nor do older employees stay with an organization for shorter periods of time than any other employees. Furthermore, we found no significant difference in level of satisfaction between the manufacturing sector and the commercial sector. Formal business operators (e.g. limited liability partnerships, limited companies, etc.) were more satisfied with their older employees rather than informal ones. Additionally, size of corporation was related to the level of satisfaction. Lastly, the most desired intervention measures were intermediary mechanisms to link potential employers closer to potential employees. Preferred choices of government incentives to boost the employment of older people, by both business sector are tax incentives and wage subsidies.

A theory of managerial compensation and taxation with endogenous risk

We study the impact of endogenous shocks driven by collective actions of managers. We analyze how such endogenous shocks impact social welfare by employing an overlapping-generations model. We first prove that the competitive equilibrium allocation is suboptimal because of the externalities in managers’ wages and in equity market. We establish that a socially optimal allocation can be achieved if the planner imposes wage taxes (or subsidies) on managers and equity taxes. Our results help provide an alternative explanation as to why managers are compensated and taxed differently than other workers. We then extend the model by incorporating unobservable actions for managers and show that a second-best allocation can be implemented if the planner imposes equity taxes.

Cross-Border Employment: Aligning Corporate Income Tax, Transfer Pricing and Wage Tax

The authors assess how cross-border employment arrangements require a closer look in the post-BEPS era. As the definitions of “permanent establishment” and “economic employer” have been widened, both transfer pricing and wage tax issues are to be mapped and analysed by corporate, multinational taxpayers. This article discusses a number of issues involved with aligning corporate income tax, transfer pricing and wage tax.

A Taste for Taxes: Minimizing Distortions Using Political Preferences

We conduct an experiment with online workers to assess whether the distortionary effect of a tax is sensitive to the ideological match between taxpayer and tax expenditures. We find that, among self-identified political moderates, the labor supply elasticity with respect to the net of tax wage is significantly smaller when individuals pay taxes to a favored government agency as compared to an unfavored one. While the tax has a significant distortionary effect in the latter case, with a point estimate for the labor supply elasticity of approximately 0.75, the elasticity point estimate is virtually zero when taxes go to a favored agency. There is also an increase in total output for the matched population. There is no evidence of a similar effect for those on the ends of the ideological spectrum.

Causation, Science and Taxation

A surprising feature of legal and economic discourse on taxation is the rare mention of causation. Causation is typically only discussed in respect of tort law and criminal law and not in other areas such as tax law. This seems to be because much of the analysis of taxation is a type of applied moral philosophy where the idea is to justify a preferred tax policy and not to discuss how a tax policy would cause a desirable outcome. Scientific inquiry is concerned however with identifying a theory of causation in respect of tax policy. For example, corporate tax cuts are often thought to cause economic growth. A scientific approach to taxation requires us to test this and other theories of taxation. This is necessary because science proceeds at least in part by the falsification or at times the augmentation of theories of causation. Hence, ideas about tax causation that seem to be wrong in the sense that an explanation of cause-and-effect seems to be subpar should be of special interest to tax scholars. Several of these are discussed here as follows: (i) the Laffer curve positing a negative relation between statutory tax rates and tax collections; (ii) the “small open economy” model of corporate tax incidence as passed entirely to labor; and (iii) the “trickle-down” economics or deadweight loss of income taxation however posited without any corresponding deadweight loss from wage taxation. The combination of these ideas forms the basis for much of modern tax policy design. However, the thesis of this paper is that these theses are subpar and that tax clinicians (such as, tax lawyers and accountants) may be able to infer causation in the tax context as a more advanced type of scientific inquiry. The practical experience of practitioners amounts to a clinical form of scientific knowledge about taxation.

A Kinked Health Insurance Market: Employer-Sponsored Insurance under the Cadillac Tax

The Affordable Care Act imposes a 40 percent excise tax on high-cost “Cadillac” health insurance plans in excess of defined thresholds beginning in 2020. Using economic theory and a microsimulation model, we predict how employers will respond to the Cadillac tax by adjusting wages and health insurance benefits. In its first year, 13.34 percent of individual and 16.73 percent of family employer-sponsored health insurance plan holders will be affected by the Cadillac tax; these percentages will increase to 35.33 and 42.01 percent, respectively, by 2025. Over 99 percent of those affected will reduce their health insurance benefits to the thresholds. Effectively, the Cadillac tax will impose a hard cap on health insurance benefits, causing a clustering of benefits at the thresholds and a sharp reduction in the variance of benefits. Revenue from the Cadillac tax through 2025 will total $204 billion, all but $42 million of which will stem from “indirect” revenues—health insurance benefits shifted into taxable wages. This shift will increase wage growth and decrease benefit growth for those affected by the Cadillac tax. We simulate a cap on the tax exclusion of employer-sponsored insurance premiums and conduct sensitivity analyses with linear regression metamodeling.

The Impact of Fiscal Policy on Macroeconomic Variables: New Evidence from a DSGE Model

The purpose of this article is to analyze the macroeconomic impacts of fiscal policy in Iran using a new-Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. The model takes into account distortionary taxations on wage, dividend, and consumption, while government expenditures are broken down into consumption of goods and services, and investment. The model is calibrated for Iran based on the estimated parameters by Bayesian method. To do so, a data set from 1981 to 2016 is used. The impulse response functions illustrate that an increase in consumption tax rate has a larger impact on the contraction of the economy than wage tax rate whereas the expansionary effects of government investment is much larger than government consumption expenditures.

Fiscal Devaluation in a Monetary Union

Given that exchange rate devaluations are no longer available in a monetary union, fiscal devaluations are one potential way to address divergence in competitiveness and trade imbalances. Employing a DSGE model calibrated to the euro area, we quantify the international effects of a fiscal devaluation implemented as a revenue-neutral shift from employers’ social contributions to the value added tax. We find that a fiscal devaluation carried out in the South has a strong positive effect on output, which is five times larger than under a wage tax cut. However, the effect on the trade balance and the real exchange rate is mild. The negative effect on the North’s output is weak.

The Unemployment Insurance Taxable Wage Base Mystery

Unemployment insurance experts lament the low Federal taxable wage base (TWB), last increased to $7000 per worker in 1982. The Federal TWB sets only a system minimum and by 2014 all but two states had TWBs that exceeded the minimum, opening up state TWB choice for study. States do align TWB with state payroll earnings. Indeed TWB/WAGE ratios within states have been remarkably stable for decades, though the ratio varies dramatically across states. Critics seem especially concerned about the tax regressivity of low TWBs, but the hypothesis that more progressive states choose less regressive (higher) TWBs is flatly rejected by the data.Earlier UI analysts focused on employer insurance equity, and the resistance of low cost, high-wage (stable) employers to subsidizing high cost, low-wage (unstable) employers. These analysts provided convincing evidence that (i) employers believed this to be the key issue, and (ii) the TWB did redistribute the insurance premium burden in the hypothesized direction. Across states – wage levels constant – economies characterized by greater income inequality and a preponderance of large (low turnover) firms are associated with lower TWBs. Apparently critics were right to imagine a link between wages and the TWB, but ignored the fact that this matching could be done better across location.

Tax System and Its Development in Kosovo

With this work we intend to track successive chronological steps of tax system development in Kosovo in the post war period, first under the international protectorate and then, after 2008 as an independent state. The most important changes that accompanied Tax System in Kosovo is when it evaluated from UNMIK system of regulations. While the emphasis will remain on treatment of current important change of tax system, revealing a challenge on most discussed issue of 2001, the year when for the first time is implemented the VAT, then in 2002, when it is implemented Wage Tax, and Profit Tax for legal persons, which by that time were taxed with Presumptive Tax, then in 2005 it was done a tax reform, replacing Presumptive Tax, Wage Tax and Profit Tax with two types of taxes, as: Personal Income Tax, which taxes physical persons and Corporate Income Tax, which taxes legal persons. DOI: 10.5901/ajis.2016.v5n3s1p382

Labor Tax Reform and Equilibrium Unemployment: A Search and Matching Approach

The paper studies simple strategies of labor tax reform in a search and matching model of the labor market featuring endogenous labor supply. Changing the composition of the tax wedge---that is, reducing a payroll tax and increasing a progressive wage tax such that the marginal tax wedge remains unaffected---increases employment, reduces the equilibrium unemployment rate, and increases public revenue as long as workers do not have all the bargaining power in wage negotiations. A strategy of replacing employment taxes by payroll taxes increases employment and reduces the equilibrium unemployment rate, while the effect on public revenue is ambiguous.

The Impact of Taxes on Competition for CEOs

This paper contributes to the question of how taxation of corporate profits and wages affects competition among firms for highly skilled human resources such as CEOs. Use of a theoretical model shows that wage taxes can have a substantial impact on the outcome of such a competition if marginal tax rates are different as in an international labor market. Further, the paper shows that increasing the wage tax rate unilaterally can have an ambiguous effect on observed gross compensation levels. However, in a local labor market for CEOs, observed gross fixed salaries should decline in the wage tax rate. Tax effects in a market for CEOs is a particularly interesting topic because recent developments with respect to compensation practices of top-level managers have opened a public debate about the use of instruments for regulating compensation of those managers. Furthermore, many countries around the world use tax incentives in order to facilitate immigration of highly skilled human resources. The investigation follows an analytical economics-based approach by extending an LEN model with elements of competition for scarce human resources and income taxation. It investigates the impact of differential taxation on the competition between two firms for the exclusive service of a unique, highly skilled CEO.

Dynamic elasticities of tax revenue: evidence from the Czech Republic

ABSTRACTTax revenue elasticities with respect to tax bases are key parameters for the modeling of public finances. Yet the existing studies estimating these elasticities for emerging countries disregard the effects of tax reforms on tax revenue, which renders their estimates inconsistent. We introduce a framework for estimating both short- and long-run tax revenue elasticities using quarterly data adjusted for the effects of reforms. Our results suggest that the long-run elasticities in the Czech Republic are 1.4 for wage tax, 0.9 for value added tax, 1.7 for profit tax and 1 for social security contributions. The adjustment process for value added tax and social security contributions is fast, but for the remaining two categories, it is important to distinguish between the short- and long-run elasticities: the initial response of revenue to changes in the bases is weak. In the case of wage tax it takes half a year for the elasticity to surpass unity.