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Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()

The COVID-19 pandemic has led to an increase in public debt in most countries, and the Ukraine war is likely to have similar effects. This will increase fiscal pressure in the future. We study how the shape of the optimal nonlinear income tax schedule is affected by this increase. We calibrate the w...

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Detalles Bibliográficos
Autores principales: Ayaz, Mehmet, Fricke, Lea, Fuest, Clemens, Sachs, Dominik
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier B.V. 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9840982/
https://www.ncbi.nlm.nih.gov/pubmed/36686151
http://dx.doi.org/10.1016/j.euroecorev.2023.104381
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author Ayaz, Mehmet
Fricke, Lea
Fuest, Clemens
Sachs, Dominik
author_facet Ayaz, Mehmet
Fricke, Lea
Fuest, Clemens
Sachs, Dominik
author_sort Ayaz, Mehmet
collection PubMed
description The COVID-19 pandemic has led to an increase in public debt in most countries, and the Ukraine war is likely to have similar effects. This will increase fiscal pressure in the future. We study how the shape of the optimal nonlinear income tax schedule is affected by this increase. We calibrate the workhorse optimal income tax model to five European countries: France, Germany, Italy, Spain and the UK. Applying an inverse-optimum approach to the pre COVID-19 economies we obtain the Pareto weights implicitly applied by the different countries. We then ask how the schedule of marginal and average tax rates should be optimally adjusted to the increase in fiscal pressure. For all countries, we find that the increase in fiscal pressure leads to a less progressive optimal tax schedule both in terms of marginal and average tax rates.
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spelling pubmed-98409822023-01-17 Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective() Ayaz, Mehmet Fricke, Lea Fuest, Clemens Sachs, Dominik Eur Econ Rev Article The COVID-19 pandemic has led to an increase in public debt in most countries, and the Ukraine war is likely to have similar effects. This will increase fiscal pressure in the future. We study how the shape of the optimal nonlinear income tax schedule is affected by this increase. We calibrate the workhorse optimal income tax model to five European countries: France, Germany, Italy, Spain and the UK. Applying an inverse-optimum approach to the pre COVID-19 economies we obtain the Pareto weights implicitly applied by the different countries. We then ask how the schedule of marginal and average tax rates should be optimally adjusted to the increase in fiscal pressure. For all countries, we find that the increase in fiscal pressure leads to a less progressive optimal tax schedule both in terms of marginal and average tax rates. Elsevier B.V. 2023-04 2023-01-16 /pmc/articles/PMC9840982/ /pubmed/36686151 http://dx.doi.org/10.1016/j.euroecorev.2023.104381 Text en © 2023 Elsevier B.V. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Ayaz, Mehmet
Fricke, Lea
Fuest, Clemens
Sachs, Dominik
Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title_full Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title_fullStr Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title_full_unstemmed Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title_short Who should bear the burden of COVID-19 related fiscal pressure? An optimal income taxation perspective()
title_sort who should bear the burden of covid-19 related fiscal pressure? an optimal income taxation perspective()
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9840982/
https://www.ncbi.nlm.nih.gov/pubmed/36686151
http://dx.doi.org/10.1016/j.euroecorev.2023.104381
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