CE26 - Individus, entreprises, marchés, finance, management

Taxation, Inequality, and Economic Behaviors in France – TAXINEQ

Submission summary

After a dramatic decline of income and wealth inequality over the first part of the XXth century, many developed countries are now experiencing a surge in inequality. Progressive income and wealth taxation may serve as an appropriate counter-force against rising inequality. However, a common objection is that it may trigger behavioral responses from taxpayers, responses which may be harmful to the macroeconomic success of an economy.
TAXINEQ aims at understanding how taxation affects economic behaviors of the richest. To achieve this aim, TAXINEQ proposes to use France as a laboratory to provide an in-depth analysis of the various mechanisms through which taxation affects the economic behaviors of top income and wealth owners.
To this aim, we will mobilize recently made available exhaustive longitudinal administrative data with frontline econometric methodologies to provide a comprehensive empirical analysis addressing the two following questions: i) What are the different margins (evasion, optimization, labor supply, migration, compensation bargaining, savings) through which income/wealth taxation affects the economic behavior of the richest? ii) How does the design of a tax (tax base, loopholes, reporting requirement) affect behavioral responses to income/wealth taxation?

The first work package aim at providing a comprehensive analysis of the impact of taxation on top income earners. The first project will analyze the different types of behavioral responses to income taxation as well as their interaction with tax design. The second project will study the incidence of taxes on very top labor incomes, i.e. how the burden of a tax specific to very top labor earners is shared between very top labor incomes, the firms, and all other employees. The third project will offer a policy-relevant overview of the current state of research on the taxation of top income earners.

The second work package aim at studying how changes in tax rates and in tax design affect the behavior of wealthy taxpayers. The first project will exploit changes in wealth tax rates and ceiling rules to estimate and disentangle for the first time all the potential margins (labor supply, migration, avoidance, and savings) through which top wealth owners can respond to wealth tax rates. The second project will investigate whether behavioral responses may be affected by how taxes are designed by quantifying the effect of information reporting policies —a key dimension of tax design—on taxpayer behavior. The third project will focuses on how the design of tax incentives for charitable giving can affect donation behaviors. In particular, it will provide a unique opportunity to analyze non-monetary responses to taxation i) by identifying how tax consent and social norms may affect avoidance behaviors and ii) by analyzing how commitment to specific charities may influence the price elasticity of donation. The fourth project will offer a policy-relevant overview of the current state of research on the taxation of top wealth owners.


TAXINEQ will help policy-makers i) to better understand the impact of existing taxation, ii) to design better public policies able to foster growth and reduce inequality.

Project coordination

Jonathan GOUPILLE-LEBRET (Center for Economic Research on Governance, Inequality and Conflict)

The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.

Partner

CERGIC Center for Economic Research on Governance, Inequality and Conflict

Help of the ANR 208,148 euros
Beginning and duration of the scientific project: August 2024 - 48 Months

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