More than 20 countries recently adopted digital services taxes, with many others threatening to do so. The Organisation for Economic Co-operation and Development (OECD) is attempting to convince countries to withdraw their digital taxes in return for an international agreement to implement its Pillar One proposal that would let countries tax prorated shares of the profits of foreign firms with local sales. This paper identifies incentives that countries have to impose inefficiently high rates of digital taxes and calls attention to shortcomings of the OECD’s formulary apportionment alternative. Diverging interests and the inflexible nature of the multilateral bargaining process make prospects for global agreement highly uncertain.
{"title":"Digital Tax Arithmetic","authors":"J. Hines,","doi":"10.1086/723179","DOIUrl":"https://doi.org/10.1086/723179","url":null,"abstract":"More than 20 countries recently adopted digital services taxes, with many others threatening to do so. The Organisation for Economic Co-operation and Development (OECD) is attempting to convince countries to withdraw their digital taxes in return for an international agreement to implement its Pillar One proposal that would let countries tax prorated shares of the profits of foreign firms with local sales. This paper identifies incentives that countries have to impose inefficiently high rates of digital taxes and calls attention to shortcomings of the OECD’s formulary apportionment alternative. Diverging interests and the inflexible nature of the multilateral bargaining process make prospects for global agreement highly uncertain.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"119 - 143"},"PeriodicalIF":1.7,"publicationDate":"2023-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41406585","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the incentives for countries to implement and maintain the global minimum tax introduced by the G20/OECD’s Inclusive Framework 2021 agreement: Pillar 2. It argues that the agreement has sufficient elements to create incentives for large headquarters countries to implement it. Conditional on them doing so, there is an incentive for host countries to follow suit. The agreement would put a significant floor on tax competition. However, there are caveats to this argument in terms of complexity and the incentive to maintain some provisions that are likely to raise little revenue.
{"title":"International Tax Competition and Coordination with A Global Minimum Tax","authors":"Michael P. Devereux","doi":"10.1086/723198","DOIUrl":"https://doi.org/10.1086/723198","url":null,"abstract":"This paper investigates the incentives for countries to implement and maintain the global minimum tax introduced by the G20/OECD’s Inclusive Framework 2021 agreement: Pillar 2. It argues that the agreement has sufficient elements to create incentives for large headquarters countries to implement it. Conditional on them doing so, there is an incentive for host countries to follow suit. The agreement would put a significant floor on tax competition. However, there are caveats to this argument in terms of complexity and the incentive to maintain some provisions that are likely to raise little revenue.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"145 - 166"},"PeriodicalIF":1.7,"publicationDate":"2023-02-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46659032","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
New York State (NYS) incentivizes cities and towns to merge their Tax Assessor’s Offices while maintaining separate taxing authority. This paper treats cooperative agreements among small tax-assessing jurisdictions in NYS as a natural experiment to explore economies of parcel scale in property assessment. Using 2003–2014 data, we estimate these scale economies using cost-function models with control functions. Our results show consistent evidence of economies of parcel scale, holding quality constant. Local governments can save personnel, operational, and contractual costs by collaborating with nearby localities in conducting property assessments.
{"title":"Returns to Scale in Property Assessment: Evidence from New York State’s Small Localities Coordination Program","authors":"Yusun Kim, Yilin Hou, J. Yinger","doi":"10.1086/723127","DOIUrl":"https://doi.org/10.1086/723127","url":null,"abstract":"New York State (NYS) incentivizes cities and towns to merge their Tax Assessor’s Offices while maintaining separate taxing authority. This paper treats cooperative agreements among small tax-assessing jurisdictions in NYS as a natural experiment to explore economies of parcel scale in property assessment. Using 2003–2014 data, we estimate these scale economies using cost-function models with control functions. Our results show consistent evidence of economies of parcel scale, holding quality constant. Local governments can save personnel, operational, and contractual costs by collaborating with nearby localities in conducting property assessments.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"63 - 94"},"PeriodicalIF":1.7,"publicationDate":"2023-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42445102","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper discusses the Organisation for Economic Co-operation and Development’s Two-Pillar proposal for changing the global international corporate tax regime. We focus on the use of financial accounting income as part of these tax rules. We provide a relatively high-level explanation of the rules, and we discuss some inconsistencies and complexities. We also discuss potential problems and unintended consequences for companies, financial statement users, tax authorities, financial statement auditors, and financial accounting standard setters as a result of using financial accounting income in the tax base.
{"title":"The Use of Financial Accounting Information in the OECD BEPS 2.0 Project: A Discussion of the Rules and Concerns","authors":"Michelle Hanlon, Michelle L. Nessa","doi":"10.1086/723199","DOIUrl":"https://doi.org/10.1086/723199","url":null,"abstract":"This paper discusses the Organisation for Economic Co-operation and Development’s Two-Pillar proposal for changing the global international corporate tax regime. We focus on the use of financial accounting income as part of these tax rules. We provide a relatively high-level explanation of the rules, and we discuss some inconsistencies and complexities. We also discuss potential problems and unintended consequences for companies, financial statement users, tax authorities, financial statement auditors, and financial accounting standard setters as a result of using financial accounting income in the tax base.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"193 - 232"},"PeriodicalIF":1.7,"publicationDate":"2023-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49109508","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article focuses on Pillar Two’s substance-based income exclusion and illustrates how it is the result of three separate international tax developments that have taken place over the past 15 years. This article argues that by allowing countries to include this exclusion in their minimum taxes, policy makers and politicians have built an escape hatch into Pillar Two that would allow certain jurisdictions to keep their tax rates low, despite headlines proclaiming the end of tax competition.
{"title":"Pillar Two’s Built-In Escape Hatch","authors":"Lilian V. Faulhaber","doi":"10.1086/723200","DOIUrl":"https://doi.org/10.1086/723200","url":null,"abstract":"This article focuses on Pillar Two’s substance-based income exclusion and illustrates how it is the result of three separate international tax developments that have taken place over the past 15 years. This article argues that by allowing countries to include this exclusion in their minimum taxes, policy makers and politicians have built an escape hatch into Pillar Two that would allow certain jurisdictions to keep their tax rates low, despite headlines proclaiming the end of tax competition.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"167 - 192"},"PeriodicalIF":1.7,"publicationDate":"2023-02-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41716609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The tax systems of different jurisdictions reflect different social preferences about the relative value, or weight, placed on taxes or transfers to each income group. I apply the inverse-optimum income tax method to quantify these preferences by calculating the implied weights for every US state. To capture major features of US state tax systems, I extend the existing theory underlying the inverse-optimum method to include sales taxes, property taxes, and both national and state income taxes. Using Internal Revenue Service data, I calculate effective marginal income tax and commodity tax rates for each state and income level, and use these to find the implied weights for both single and joint filers in each income group in every US state. I observe substantial differences in social preferences across states, and I find weights that decline little above $100,000 and that do not decrease monotonically as might be expected from most theories of social welfare.
{"title":"Revealing Values: Applying the Inverse-Optimum Method to US State Taxes","authors":"Robert A. Embree","doi":"10.1086/723206","DOIUrl":"https://doi.org/10.1086/723206","url":null,"abstract":"The tax systems of different jurisdictions reflect different social preferences about the relative value, or weight, placed on taxes or transfers to each income group. I apply the inverse-optimum income tax method to quantify these preferences by calculating the implied weights for every US state. To capture major features of US state tax systems, I extend the existing theory underlying the inverse-optimum method to include sales taxes, property taxes, and both national and state income taxes. Using Internal Revenue Service data, I calculate effective marginal income tax and commodity tax rates for each state and income level, and use these to find the implied weights for both single and joint filers in each income group in every US state. I observe substantial differences in social preferences across states, and I find weights that decline little above $100,000 and that do not decrease monotonically as might be expected from most theories of social welfare.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"37 - 61"},"PeriodicalIF":1.7,"publicationDate":"2023-02-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48284607","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A common critique of nonrefundable tax credits is that benefits are limited for low-income households. Costs often dominate the refundability debate, yet how much households benefit from refundability depends on the incidence of the credit in question. California provides a unique opportunity to study how eliminating refundability of child care tax credits affects child care prices while holding other policy dimensions fixed. Using county-level price and tax return data, this study finds that nonrefundability corresponds with lower child care prices. If the price response is symmetrical and quality adjustments are limited, refundability may benefit low-income families less than the cost of the program would suggest.
{"title":"Tax Credit Refundability and Child Care Prices: Evidence from California","authors":"L. Rodgers","doi":"10.1086/723229","DOIUrl":"https://doi.org/10.1086/723229","url":null,"abstract":"A common critique of nonrefundable tax credits is that benefits are limited for low-income households. Costs often dominate the refundability debate, yet how much households benefit from refundability depends on the incidence of the credit in question. California provides a unique opportunity to study how eliminating refundability of child care tax credits affects child care prices while holding other policy dimensions fixed. Using county-level price and tax return data, this study finds that nonrefundability corresponds with lower child care prices. If the price response is symmetrical and quality adjustments are limited, refundability may benefit low-income families less than the cost of the program would suggest.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"76 1","pages":"95 - 116"},"PeriodicalIF":1.7,"publicationDate":"2023-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49376174","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using a sample of the 48 contiguous US states, we consider the problem of forecasting state governments’ revenues and expenditures in real time using models that feature mixed-frequency data. We find that mixed-data sampling (MIDAS) regressions that predict low-frequency fiscal outcomes using high-frequency macroeconomic and financial market data outperform traditional fiscal forecasting models in both a relative and an absolute sense. We also consider an application of forecasting fiscal outcomes in the face of the economic uncertainty induced by the coronavirus pandemic. Overall, we show that MIDAS regressions provide a simple tool for predicting fiscal outcomes in real time.
{"title":"Real-time Forecasts of State and Local Government Budgets with an Application to the COVID-19 Pandemic","authors":"Eric Ghysels, Fotis Grigoris, Nazire Özkan","doi":"10.1086/721844","DOIUrl":"https://doi.org/10.1086/721844","url":null,"abstract":"Using a sample of the 48 contiguous US states, we consider the problem of forecasting state governments’ revenues and expenditures in real time using models that feature mixed-frequency data. We find that mixed-data sampling (MIDAS) regressions that predict low-frequency fiscal outcomes using high-frequency macroeconomic and financial market data outperform traditional fiscal forecasting models in both a relative and an absolute sense. We also consider an application of forecasting fiscal outcomes in the face of the economic uncertainty induced by the coronavirus pandemic. Overall, we show that MIDAS regressions provide a simple tool for predicting fiscal outcomes in real time.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"75 1","pages":"731 - 763"},"PeriodicalIF":1.7,"publicationDate":"2022-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41833266","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper documents the extent and growth of gig work in the United States using Internal Revenue Service tax records. We discuss advantages of using tax data to learn about gig work and address several important methodological considerations. We find that around 12 percent of the 2018 workforce participated in contract-based gig work. Apart from the emergence of platform-based transportation work — which typically is a secondary earnings source for participants — the overall share of the workforce relying on gig work as a primary job has remained relatively constant over time. We document key differences in the work done by high- and low-income individuals.
{"title":"Is Gig Work Changing the Labor Market? Key Lessons from Tax Data","authors":"A. Garin, Emilie Jackson, Dmitri K. Koustas","doi":"10.1086/722139","DOIUrl":"https://doi.org/10.1086/722139","url":null,"abstract":"This paper documents the extent and growth of gig work in the United States using Internal Revenue Service tax records. We discuss advantages of using tax data to learn about gig work and address several important methodological considerations. We find that around 12 percent of the 2018 workforce participated in contract-based gig work. Apart from the emergence of platform-based transportation work — which typically is a secondary earnings source for participants — the overall share of the workforce relying on gig work as a primary job has remained relatively constant over time. We document key differences in the work done by high- and low-income individuals.","PeriodicalId":18983,"journal":{"name":"National Tax Journal","volume":"75 1","pages":"791 - 816"},"PeriodicalIF":1.7,"publicationDate":"2022-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49014199","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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