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An annual net wealth tax could inject half a trillion dollars into the economy. In advance of Tax Day, Oxfam called for a US wealth tax to reduce extreme wealth inequality, advance racial justice, tackle the climate crisis, and protect democracy. Oxfam also highlighted how fairer taxation of the ultrawealthy could have prevented the current debt-ceiling gridlock. In a new analysis released today titled “Tax Wealth, Tackle Inequality,” Oxfam underlined that extreme wealth concentration is at a record high in the US. New Oxfam calculations based on Forbes data show that US billionaires are almost a third richer than they were at the onset of the pandemic in 2020, even accounting for the turbulent stock market in 2022. Since 2013, US billionaires have gotten 86 percent richer. Oxfam also calculated that for every $100 of wealth created from 2012-2021 in the US, $37 have gone to the richest 1 percent, with the bottom 50 percent only receiving $2. "Tax Day is a reminder that the tax system isn’t working for ordinary Americans. It’s built to favor the richest in our society,” said Nabil Ahmed, Oxfam America’s Director of Economic Justice. “The ultrawealthy are sitting on mountains of wealth that remain largely untouched by taxes, and their wild riches are in no small part a result of intentional public policy. We need to implement strategic wealth taxes if we want to stand any chance at reining in this kind of Gilded-Era wealth inequality that allows the super-rich to have a stranglehold over our economy.” Not only is wealth inequality more extreme than income inequality, but wealth is also highly stratified by race. Oxfam makes the case that wealth taxation can narrow the racial wealth gap, which has hardly moved since 1950. Today, the average Black American household holds only about 12 cents in wealth for every dollar of the average white American household. The same trend applies to stock ownership: 89 percent of shares are owned by white families, compared with just 1 percent owned by Black families. Wealth taxation also plays a vital role in responding to the climate crisis. Climate breakdown is disproportionately driven by the investments and emissions of the wealthiest people, and their choices to invest in polluting industries affect how all Americans use energy. Oxfam’s analysis of 125 of the richest billionaires shows that on average their individual investments result in a million times more emissions than one average person. “Taxing the ultrawealthy is essential to tackle extreme wealth inequality and protect our democracy from the threat of oligarchy – but it is also central to advancing racial and climate justice, connections that we must pay more attention to,” continued Ahmed. “It’s also clear that political gridlock around the debt ceiling is a consequence of tax cuts on the richest.” Oxfam calls on the Biden administration and Congress to enact a wealth tax in order to build a more equitable and prosperous economy, and underlines Senator Warren’s Ultra-Millionaire Tax as an “urgent and necessary proposal.” Oxfam estimates that a 3 percent tax on billionaire wealth alone, as proposed in the Warren wealth tax, would raise $114 billion annually, while taxing all wealth above the lower threshold of $50 million would raise this revenue substantially. Oxfam, the Institute for Policy Studies, and Patriotic Millionaires calculated that an annual net wealth tax could raise over half a trillion dollars ($582.6 billion) each year by taxing the ultrawealthy at higher rates: 2 percent above $5 million, 3 percent above $50 million, and 5 percent above $1 billion. As an illustrative example, over $1 trillion could be raised through implementing a one-off windfall tax of 27 percent on each billionaire. The billions of dollars raised from these wealth taxes could fund countless crucial inequality-busting investments for working families across the US and abroad. For example, a 3 percent wealth tax on billionaires alone could finance the $97 billion needed to reinstate the Child Tax Credit program, which cut child poverty by an astonishing 30 percent during the height of the pandemic. $80 billion would go a long way to help lower-income countries address the catastrophic impacts of the climate crisis. “Without a wealth tax, extreme inequality will stubbornly persist and working families will continue to be held back,” said Ahmed. “Polls consistently show that raising taxes on the ultrawealthy and corporations is overwhelmingly popular with the American public, and other high-income countries offer lessons for how it can be done. These taxes would allow us to make strategic investments in our country that directly address the existential crises of our time and pave the way for a more prosperous future for everyone. Tax Day is a great time to start.”

We next perform cross-sectional heterogeneity checks according to local environmental regulations and expect that there is a larger decline in pollution behavior after the VAT reform for firms located in areas with stricter environmental regulations. As noted earlier in our paper, the TCZ policy was implemented by the central government in 1998 with the objective of reducing SO2 emissions in cities with particularly high air pollution. Once a city was designated as a TCZ city, tougher regulatory policies were implemented. The three main policy measures embodied in the TCZ city were the closing of the biggest polluters, reducing the sulfur-content of coal, and promoting cleaner coal-burning (Cai et al., 2016; Hering & Poncet, 2014). We thus add an interaction term between VAT and the TCZ dummy to our regression and find that the coefficient on the interaction term is negative and statistically significant at 1%, which is consistent with our hypothesis. The detailed result is presented in column (4) of Table 8.

5.2.4 Water-polluting industries

The remarkable rise of the VAT has attracted relatively little analytical or empirical attention. This paper aims to help fill this gap, exploring both the causes and consequences of the spread of VAT. Using a panel of 143 countries observed over 25 years, we estimate a recursive two-equation system characterizing both the decision to adopt a VAT and the impact of the VAT on revenue once adopted. The latter is of interest not only in itself but also, it has been shown, as an indicator of whether or not the VAT has proved an especially effective form of taxation. There emerges a rich set of determinants of VAT adoption. Income per capita, interestingly, is not amongst them: the VAT is no longer the preserve of high income countries. A country is less likely to adopt a VAT, however, the larger is its agricultural sector (this being a hard-to-tax group, and perhaps harder under the VAT than under other taxes), and the lower is its past revenue ratio (suggesting a greater need to enhance revenues). The IMF also appears to have played an independent and significant role in the spread of the VAT: participation in a non-crisis IMF program in itself significantly increases the likelihood of adopting a VAT. Yardstick competition also seems to have been significant, with a country more likely to adopt a VAT the greater the proportion of others in the region who have already done so. Most strikingly, and intriguingly, the results indicate strongly that, all else equal, more open economies are less likely to adopt a VAT. A central question in assessing the consequences of the VAT is simply: Has it enabled countries to increase their tax revenues? This is important both in itself–put another way, it relates to the truth of the presumption underlying the ‘money machine’ concerns raised prominently in recent discussions of possible VAT adoption in the United States–and because, in the simple framework analyzed above, such a revenue gain proves to be necessary and sufficient for the VAT to have reduced the marginal cost of public funds. The simplest empirical framing of this question gives a clear-cut answer: a dummy for the presence of a VAT, added to a standard tax effort equation, proves to be significantly positive but modest in size: adoption of the VAT is associated with a long run increase in the overall revenue-to-GDP ratio of about 4.5%. Allowing the impact of the VAT to vary with country circumstances, however, a more complex picture emerges. The shift effect of the VAT now becomes negative, but acting in the opposite direction are gains that tend to be greater in higher income and in more open economies. The former may plausibly reflect a greater ability to administer and comply with the tax. The latter seems likely to reflect the relative ease with which VAT can be collected on imports (while the lower likelihood of adoption in such circumstances, mentioned above, may reflect the ease of then relying on tariff revenue rather than undertaking the fundamental modernization of the tax administration that is often needed to implement a VAT). These opposing effects imply that while some countries may have gained (or would gain) revenue from adopting the VAT, others have (or would) not. This ambiguity has been explored by calculating predicted revenue effects for each country in the sample (Table 3). While these calculations can be no more than suggestive, the impression that emerges is that adoption has increased revenue and improved effectiveness in the large majority of countries that have implemented a VAT, and would do so too for most of those that have not. Only in Sub-Saharan Africa is the weight of evidence mixed. What this suggests, however, may be not that the VAT in these countries is intrinsically inappropriate. It could be that the VAT there has significantly improved the overall efficiency of the tax system, but with a greater degree of offset through reduced use of other taxes (notably, perhaps, tariffs). It does suggest, however–given clear signs of associated revenue and effectiveness gains in some countries of sub-Saharan Africa–that significant work remains to be done in improving the functioning of the VAT in much of the region.

7. Discussion and conclusions This paper has used microsimulation models and input–output tables to estimate the impact of preferential VAT rates on tax revenues, poverty and inequality in six LMICs (Ethiopia, Ghana, Senegal, Sri Lanka, Uzbekistan and Zambia), and compared these impacts to existing and hypothetical cash transfer programmes. We find that preferential VAT treatments (excluding exemptions that have strong administrative justifications, such as for public services, financial services, accommodation costs and small businesses) are a poor way of channelling resources towards poor households. Although in isolation these preferential rates do reduce poverty, and potentially sometimes by a significant amount, they are very expensive and much of their benefit accrues to better off households. This is partly because monetary expenditure is relatively less important for low-consumption households (who obtain more from home production) in the LMIC context, and thus exemptions have less of an impact for such households than they would if all consumption was comprised of monetary expenditure. However, much more important is the rather banal fact that high consumption households spend more in cash terms on exempt and reduced rate goods and services. This means that the implicit cash subsidy afforded to high-consumption households is far greater, on average, and renders preferential VAT rates an expensive way of attaining a given level of poverty reduction. Although we cannot generalise this conclusion to other country contexts with certainty, the consistency of the result in the six countries studied – which have different levels of income, inequality and tax structures – leads us to believe that similar patterns should be expected in other LMICs, mirroring similar findings in the OECD and EU. Only if preferential VAT rates are targeted narrowly on goods and services consumed in greater absolute quantities by the poor would the overall qualitative conclusion be overturned. Existing cash transfer schemes are better targeted at poor households towards the bottom of the consumption distribution. However, they may not always provide a suitable means of compensating households for the reduction in purchasing power they would face if the VAT base was broadened. Many existing schemes remain relatively small-scale and tend to target subsets of the poorest parts of the population, often based on specific demographic or geographic eligibility criteria, even before accounting for potential exclusion (and inclusion) errors. Significant increases in the scale and coverage of such schemes would be required to offset the negative impact of VAT base broadening on households with low and middling levels of consumption. In these countries, that is sometimes those below or close to the $1.90 and $3.20 international poverty lines. A Universal Transfer (UT) would overcome coverage issues in existing cash transfer schemes. Simulating a counterfactual policy scenario in a comparable way in each of the countries considered, our results indicate that broadening the VAT base and using the revenue to fund a UT would boost the consumption of the least well-off households, reducing inequality and measures of extreme poverty in all cases. Our focus on a UT is primarily due to its simplicity and comparability across countries, allowing us to highlight the possible gains for poorer households from one policy option in different contexts. However, while governments are able to choose from a range of redistributive instruments, a UT would appear to have a number of desirable features. No sophisticated targeting would be required, in principle no vulnerable households would be excluded, and the inclusion of the middle class might be a boon to political feasibility. There are of course questions of practicality -2.0 -1.8 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 Ethiopia Ghana Senegal Sri Lanka Uzbekistan Zambia cirt e mytil auqeni ni egnah C Gini index 90/10 ratio Figure 6.2. Estimates of the impact on inequality from a uniform VAT funding a UT. Note: Inequality measures are calculated based on consumable income per capita pre- and post-reform. Source: Author’s calculations using GHATAX, ETHTAX and CEQ/World Bank fiscal incidence analysis. R. Warwick, T. Harris, D. Phillips et al. World Development 151 (2022) 105742 14 with regards to the ability of LMIC governments to administer such nationwide programmes, although the technology required is increasingly available (Ghana, for instance, has been distributing biometric ID cards to its population (Thiel, 2020)).

6.3. Country-level estimates Our preceding results indicate substantial VAT revenue losses due to non-compliance, especially among countries with low state capacity, as proxied by the WGI index. Those estimates were for groups of countries defined by region or institutional quality, but estimates of compliance and policy gaps for specific countries are of independent interest. Our panels are too short to estimate ci efficiently country-by-country, but heterogeneity in compliance among individual countries remains a subject of considerable interest. The analysis in Section 4 suggests that the Control of Corruption index wi is closely related to compliance gaps. In this section, we therefore estimate a general model of revenue performance Eit ¼ ai þ B wi; Mit Cit þ x0 ith þ uit: ð15Þ using non-parametric methods. The specification (15) contains a large number of regressors, including country and region-by-year fixed effects as well as parametric controls, and non-parametric estimation performs poorly in such settings (Carneiro et al., 2011).35 We therefore estimate the model in two steps. In the first step, we regress Eit and Mit=Cit on the full set of control variables xit and fixed effects, and compute the residuals from each regression. In the second step, we estimate (15) on the residualized Eit and Mit=Cit by local linear regression, using the Epanechnikov kernel and the optimal bandwidth computed using the procedure of Racine and Li (2004). We then recover the marginal effects of the import ratio b ¼ @B=@ð Þ M=C at the means of the data for each country in the sample. Finally, we recover the estimated compliance gap for each country using (9) and the algebraic procedure discussed in Section 3.1. Estimates appear in Table A1 in the Appendix. Fig. 4 graphs the domestic compliance gaps estimated from this approach.36 The estimated compliance gap is broadly decreasing in institutional quality, as expected. The patterns of individual estimates observed in the figure help to elucidate the competing effects of geography and institutions. The highest estimated gaps—in excess of 60 percent of domestic value added—are in African countries, even though not all of them have the lowest values of the governance index. Somewhat lower gaps but still high are observed in a number of Eastern European and (to a lesser degree) Asian countries for example. Fig. 5 shows estimated compliance gaps from the specification with controls for EU countries. This gives a sense of if our measures line up with external measures when the latter are available, and speaks to whether our measures might be useful when they are not. For these countries, accounting estimates of the compliance gap are available using the top down method from Barbone et al. (2013), and subsequent updates by the European Commission. In this case, we report aggregate compliance gaps that adjust for Fig. 3. Institutional quality in the European Union. 34 Of course, this should not be interpreted as a statement about the welfare effects of the policy gap. Selective rate reductions create both winners and losers in the domestic economy and so have ambiguous welfare impacts. In contrast, revenue losses due to the compliance gap have a less ambiguously negative impact on welfare (Emran and Stiglitz, 2005). 35 We employ the same control variables as in previous specifications, as well as region-by-year fixed effects for the seven global regions defined in Table 3. 36 For legibility, the figure excludes the estimate for Republic of Congo, which is 250 percent. P. Morrow, M. Smart and A. Swistak Journal of Public Economics 208 (2022) 104634 11 the higher compliance rate for imports, rather than domestic compliance gaps, since that is what is reported in the previous literature.37 The resulting estimates are therefore considerably smaller. The two sets of estimates are graphed against each other in Fig. 5. Compared to the accounting measure, our estimates are broadly similar. Gaps are largest in the newly acceding countries of Eastern Europe, as well as in Italy and Greece. Compliance gaps are less than twenty percent in many northern and western European countries. Thus, unlike other regions of the world, losses in potential VAT revenues reflect the policy gap far more than the compliance gap in most EU countries. 7. Compliance and institutions: An exploratory analysis The country-level estimates of Section 6.3 suggest a relationship between perceived corruption and VAT compliance at the national level. Cross-sectional patterns depicted in Fig. 4 cannot be taken as evidence of any causal link between compliance and institutional quality among countries, as many other observable and unobservable factors correlated with corruption perceptions may also explain differences in compliance gaps among countries. Moreover, as emphasized by Besley and Persson (2014), political and economic processes of development create a feedback loop between governance quality, tax compliance, and government revenues. In this sense, the measure of institutional quality used in Section 6.3 is just a convenient way to group countries together into those with similar institutions for the purposes of estimation, rather than the demonstration of a causal explanation for the patterns of non-compliance.

8. Concluding remarks Economists believe that institutions related to state and fiscal capacity are important for tax compliance and revenue, and that tax revenues in turn can yield improvements in state and fiscal capacity generating a positive feedback loop for economic development. That said, we lack reliable, comparable estimates which speak to the importance of non-compliance in explaining differences in revenue across countries. This paper provides a new method of estimating value added tax revenues lost due to domestic non-compliance using aggregate time series data available for a large set of countries, and shows how estimated non-compliance depends on state and civil society institutions. It relies on the insight that, because VAT compliance tends to be higher at borders, the correlation between VAT revenue performance (i.e. C-efficiency) and shares of imports in final consumption is informative about the extent of VAT non-compliance on domestic production. Our results suggest that domestic compliance varies widely across countries. Domestic compliance is especially low in countries with low measures of control of corruption and in countries in Africa, Asia, Latin America, and Eastern Europe. In contrast, in countries with higher measured institutional quality and in those countries in Northern Europe, domestic compliance is much higher. As well, we find that countries which import larger shares of imports in final consumption tend to have higher aggregate compliance due to controls at international borders. A simple thought experiment provides a back of the envelope calculation for the magnitude of this mechanism. Suppose that all countries had a domestic compliance gap lowered to the 10th percentile of (all) domestic compliance gaps if their observed domestic compliance gap were higher than the 10th percentile, and constant if it were lower. Holding actual observed consumption and import levels constant, this would reduce the amount of global tax revenue lost by 23% in 2016.40 While our results speak to the importance of border controls in promoting fiscal capacity, we abstract from welfare effects in our analysis. A formal cost-benefit analysis of VAT taxes versus trade taxes may offer normative results. However, we believe that this first bit of evidence on using trade and VAT performance to understand domestic non-compliance is a first step in that direction.

ABSTRACT: President Trump imposed tariffs in 2017 on several of China’s exports, notably steel. Many papers opposed these tariffs by using a common, invalid argument: rather than arguing these tariffs reduced U.S. welfare, they argue U.S. consumers and businesses pay the tariffs, a different, rhetorical issue. Their main evidence of harm is increases in imported goods’ after-tariff U.S. prices, especially relative to other goods’ U.S. prices. In a standard, small general equilibrium model (two countries, two goods, two factors), this price evidence is wholly ambiguous—it is even consistent with the view that Trump’s tariff was optimal, increasing U.S. welfare. Even sophisticated papers are similarly ambiguous. All fail because they neglect how government uses tariff revenue. Relying on fallacious arguments makes the free-trade position look weak and encourages protectionism.

Section 232 and 301 tariffs have nothing to do with the current inflationary spike. The tariffs—implemented in 2018—had little effect on U.S. prices, and inflation only spiked after the pandemic recession began in February 2020.

Eliminating tariffs would not significantly reduce inflation. At best, removing these tariffs would result in a one-time price decrease of 0.2%—a drop in the bucket when consumer prices have risen by more than three times as much, on average, every month since January 2021, driven largely by pandemic-related global supply chain disruptions and the war in Ukraine.

US President Joe Biden on Friday handed down instructions to increase tariffs on the import of Russian goods worth $2.8 bln, United States Trade Representative Katherine Tai said in a statement. "Over the last year, President Biden has worked with our Allies and partners to support Ukraine and impose strict costs and sanctions on Russia for its aggression against Ukraine. As part of that effort, today President Biden announced additional tariff increases on a variety of goods from Russia worth approximately $2.8 bln," the statement reads. "President Biden raised tariffs on most metal and metal products - doubling them from 35 to 70% and targeting a crucial revenue generating sector of the Russian economy. President Biden also increased tariffs on additional Russian products to 35%, including chemicals and minerals," Tai added.

Most countries are limited by their natural resources and ability to produce certain goods and services. They trade with other countries to get what their population needs and demands. However, trade isn't always conducted in an amenable manner between trading partners. Policies, geopolitics, competition, and many other factors can make trading partners unhappy.

One of the ways governments deal with trading partners they disagree with is through tariffs. A tariff is a tax imposed by one country on the goods and services imported from another country to influence it, raise revenues, or protect competitive advantages.

V. CONCLUSION Much medical evidence indicates that marijuana should not be classified as a dangerous narcotic; consequently, the differential tax treatment of marijuana businesses whereby these firms are taxed on their gross income, rather than net income (as are most other comparable businesses), is arbitrary and unjustified. While there is certainly a risk of harmful effects--arguably no more than those of many other drugs that are permitted by the FDA--there is a growing body of research that emphasizes the positive aspects of the drug and how it can provide relief for symptoms of a number of illnesses. As such, a majority of states have legalized the use of marijuana for medicinal purposes. Given this and that a sizeable majority of the public favor legalizing marijuana, there seems little reason for there to be a federally mandated prohibition of use of marijuana under all circumstances. Without the specter of federal enforcement of this ban, the states could better serve as laboratories to see the consequences of legalization of marijuana for medicinal purposes. The question of whether recreational use of marijuana should be permitted is more contested. So far, only 11 states have legalized its use for such purposes. Maintaining the harsh federal strictures against adult recreational use is not likely to cause a significant reduction of its use. In addition to criminalizing the use of marijuana, the federal government has used the tax law to penalize businesses that sell marijuana. Section 280E disallows a deduction for the legal operating expenses of a marijuana business even when the business is legal under state law. This treats drug businesses more harshly than even illegal businesses that are permitted to deduct their legal operating expenses. Even if it is proper to single out drug businesses for special punitive treatment, the device chosen in [section] 280E is arbitrary in that the size of the penalty bears no relationship to the seriousness of the events. To the contrary, the size of the penalty rests on factors that have nothing to do with the seriousness of the matter. Moreover, there is no good reason to counter the decision of a state to permit the use of marijuana by imposing a large penalty on those businesses through the tax law. In Section III of this article, we examined several possible rationales for the denial of a deduction and found that they did not bear scrutiny, and in Section IV, we examined several proposals to mitigate the adverse impact of [section] 280E on marijuana and similarly found them wanting. Where does that leave us? It is clear that the seemingly intractable conflict between the federal tax policy toward marijuana and the acceptance of its use by many states is counter to the ideals of federalism--indeed, a recent court case framed the issue as the "largest federalism dispute this country has seen since the Civil War." (78) Leaving aside difficult questions of whether contrary state laws as to marijuana are preempted by the federal prohibition, as the supreme law of the land, (79) it is difficult to understand why the federal government would impose a view on the states that marijuana has "no medical use" and thereby interfere with the decisions of a majority of states to permit and regulate its use. Congress has adhered to the view adopted in the 1970 CSA and resisted efforts to make a significant change in the CSA. Yet, Congress itself has shown doubts about that view when, for the past six years, it has passed legislation preventing the DOJ from enforcing the marijuana prohibition in Schedule I of the CSA. It is peculiar to say the least to prevent the enforcement of the prohibition while continuing to penalize marijuana businesses by denying them and credits. Ultimately, the problems imposed on marijuana businesses by [section] 280E will be resolved only when the conflicts in the treatment of marijuana in this country are resolved.

IV. LESSONS FROM ILLINOIS AND CANADA Earlier, I criticized the Illinois tax scheme as choosing the worst of both worlds, a point which should have been illustrated by the preceding discussion. In devising a marijuana tax, Illinois failed by choosing retail price for products that could have been taxed in a more efficient manner—products “not intended to be smoked.” For these products, potency was a more logical choice. Potency is easier to test for in edibles—which often are the cause of adverse effects from marijuana consumption—since it is distilled before being incorporated into the final product, and in oils and topical lotions (ditto). A tax on potency would have discouraged high-strength consumables and oils and at the same time would have been resistant to falling prices as the legal market becomes efficient. On the other hand, Illinois chose a potency tax base for “products intended to be smoked.” This tax specifically targets concentrates (i.e. dabs), but also ropes in bud and flower. It is the overly broad characterization, not the policy goal, that is the problem for this category. While concentrates frequently feature THC content of 80 or 90%, and are thus rightfully targeted by any public-health-facing-tax, bud and flower are less worrisome than either concentrates or edibles. Moreover, the cannabis plant naturally has a ceiling of around 35% THC, so potency is not the most efficient way to tax bud and flower from either a revenue collection standpoint nor from a public health standpoint. Lastly, Illinois failed in creating a tax cliff—product up to 35% THC will be taxed at a starkly lower rate than product that contains more than 35% THC. As mentioned earlier, this will incentivize producers to land their product just a hair below 35% THC, therefore creating a product with high enough THC content to appeal to current market trends, while being taxed as if it were much safer product. By learning from the mistakes of states that have already established legal markets for adult-use marijuana, I propose a hybrid solution for states still in the process of legalizing—such as Ohio. A bifurcated tax base would seem to be the most ideal form of a marijuana tax at this time, considering both our current level of research on the health effects of marijuana use and our understanding of how the entourage effect works to produce potency calculations. First, I would tax flower, bud, and trim based on weight. Doing so is the simplest and most efficient way of taxing marijuana plant matter. Revenue will not fall with market stabilization, there is little opportunity for leakage or bundling, and creating records of all plant matter as early as possible allows for maximum auditing efficiency moving forward. Second, I would tax concentrates, edibles, oils, and other “distilled” marijuana products based on potency. For now, I would measure such potency based on THC content. I understand the limitation of calculating potency by THC alone, but considering how little we understand about how the multitude of cannabinoids and terpenes work together to impair the human body, THC is a useful proxy. Some experts argue that a potency base should include CBD in its calculation—even going so far as to suggest that potency be calculated based on a ratio of THC:CBD 56—since CBD is an antagonist of THC, but I argue that our understanding is too crude to do this in a way that is grounded in science. Taxing only concentrates and other products that use distilled marijuana by potency should be feasible, even allowing for the inconsistent testing and lack of standard methodology that marks the current legal market. These forms of distilled marijuana are much more similar to alcohol, or even sugary soda, in that they are homogeneous, and testing liquid matter is far easier than testing plant matter—no “weed slurry” required here. To avoid the problem of gaming a potency tax, I propose a continuous tax, i.e. one where the percentage tax is proportionate to the milligram THC content of a product.57 I believe that potency is the ideal base for a marijuana tax, at least for products that are easily tested. Although the science is still young, higher potency product seems to correlate with harsher health effects of marijuana consumption. The same way that society is okay with alcohol so long as the negative externalities of alcohol use 56 Prieger, supra note 11 at 20. 57 For a more in-depth discussion of tax continuity, see Prieger, supra note 10 at 28-30. DRUG ENFORCEMENT AND POLICY CENTER | THE OHIO STATE UNIVERSITY 11 Electronic copy available at: https://ssrn.com/abstract=3683799 are kept to a minimum, I believe that society will be okay with marijuana if it follows the same path. The reason that the federal government levies a higher excise tax on distilled spirits than on beer stems from this societal norm—society knows that distilled spirits have a higher alcohol content and are thus more likely to harm those who partake, so the government imposes this norm via the tax system.

Background: The tobacco industry consistently and persistently exaggerates that tobacco tax increase leads to increased illicit cigarette consumption (ICC). Using a top-down approach, we found that the proportion of ICC was about 11.9% in 2012 in Hong Kong (published in Tobacco Control), versus 35.9% reported in “Asia Illicit Tobacco Indicator 2012” (funded by tobacco industry). Their updated report in 2015 showed that ICC decreased to 29.1% in Hong Kong. We re-assessed the ICC in Hong Kong, where the tobacco tax increased by 41.5% in 2011 and 11.8% in 2014.

Methods: The top-down approach was done by first estimating the total CC of local residents and visitors (top), which was based on the official data of smoking prevalence and daily CC. Then, ICC was calculated by subtracting the total CC by the legal domestic sales and the duty-free cigarettes imported personally (down). The legal domestic sales were estimated using official revenue data due to the excise duty. The legal import was estimated with three alternative scenarios of cigarettes brought in by local residents and visitors. The estimates in 2015 were validated by a population-based survey that estimated the proportion of local smokers who purchased illicit cigarettes or the cigarettes brought in from overseas personally.

Background: Regardless of good progress on implementing MPOWER package, Vietnam is still struggling with Raising tobacco tax intervention. Total taxes on tobacco products only account for 41.6% of retail price (WHO’s recommendation rate is 65-85%). The study aims to assess health impacts of different scenarios of tobacco taxes by the reduction in tobacco consumption and smoking attributable deaths.

Methods: We developed a simple static model based on previous works by Jha Prabhat et al. 2010 with several improvements. The scenarios on raising cigarette taxes were aligned with Vietnam Tobacco Tax Simulation Model developed by WHO & Vietnam MOF. Each scenario calculated the reduction in initiation and current consumption and then estimating smoking attributable deaths averted and health cost saved based on existed evidence in low and middle income countries. Four smoking groups including current youth smokers, future youth smokers, current adult smokers and future adult smokers were evaluated separately.

In this study, we apply the political cost hypothesis developed by Watts and Zimmerman (1986) to the setting of sin firms. Sin firms are companies producing alcohol, tobacco, gambling, or firearms. This is an excellent setting to examine the role of political costs in influencing firms’ approach to tax avoidance because there are clearly strong societal norms against firms that profit from human vice. Operating contrary to important social norms results in sin firms having greater exposure to additional regulation – an important type of political cost because such regulation may result in wealth transfer from the firm (Bruehne and Jacob, 2019). To be specific, the negative externalities of sin firms’ products on society (e.g., health problems caused to consumers by addictions, second-hand smoking, drunk driving, reduced economic productivity arising from excessive consumptions of cigarette and alcohol) make it more likely that these firms will face additional regulation in an effort to limit these externalities. Due to these negative externalities, there is a significant portion of the public in favor of imposing additional regulations on these firms.1

We examine whether sin firms incur additional costs relative to non-sin firms in the form of higher income tax payments. We expect that the implications for sin firms of being labelled as a “poor corporate citizen” will be much greater among regulators because they face such high exposure to additional regulations on their products. Other things being equal, sin firms lack the political capital (i.e., the influence a firm has with policymakers and regulators) to protect them from regulatory costs stemming from this type of criticism. Clearly, like firms in other industries, sin firms invest heavily in developing political capital and spend significant sums on political contributions and lobbying.2 These political capital investments may help sin firms avoid additional regulations. However, despite these investments, the nature of sin firms’ products and the resulting negative externalities make it much easier for policymakers to impose new taxes and regulations on them without concerns about pushback from their constituents. Therefore, we argue that the negative externalities of their products expose sin firms to much higher baseline levels of risk to additional regulations. Absent the threat of additional regulation, social norms may not affect sin firms’ tax avoidance.

Conclusion: In this paper, a two-sector overlapping-generations model of investment in fixed capital with endogenous labor-leisure choices has been developed with the scope of reconsidering in a rich environment the causal association between payroll taxation and the main macroeconomic variables. Neoclassical closed and small-open economies with the capital- and consumption-good decomposition have been considered. The effects of the payroll tax cuts on manhours, wealth formation, and economic growth under diversified financing schemes have been at the center stage of the investigation. In understanding the relationship between labor taxes and the macroeconomic equilibrium, the article has tried to consider, in particular, the separate and possibly contrasting effects of the various fiscal components on labor supplied. Two general budgetary strategies accompanying the reductions of labor taxation have been studied, one in which the drop in the tax revenues is balanced through the compensatory reduction in government expenditure, and one in which the structure of distortionary taxation is modified in a revenue-neutral form; in each of the two general financing regimes, we have explored a variegated constellation of sub-cases. As in a two-sector life-cycle economy, the structure of demand and the financing regimes of the tax shift matter, the type of government expenditure that is compensatorily accommodated has profound implications for the consequences of the labor tax reforms; obviously, the type of distortionary taxation used to balance the government budget has strong implications too. In economies where a consumption good is produced alongside an investment good, the real price of the capital good plays a crucial role in the functioning of the economy and the sectoral transmission of payroll tax shifts; in fact, such a price accomplishes the dual role of being an asset price and therefore reconciling the asset market equilibrium, on the one side, and equilibrating the good markets, on the other. Surprisingly, we discovered that there are cases in which a payroll tax cut is an ineffective instrument to influence labor hours in the stationary state, while in general (with the only exception of a compensatory hike in capital taxation) such a shock is benign for nonhuman wealth formation. As labor supplied ultimately depends on the worker take-home wage relative to (income from) private and social wealth, the neutrality of payroll taxes for hours worked is obtained in those cases in which (income from) nonhuman wealth and the household wage change by the same proportion. Steady state neutrality is, however, always accompanied by short-run changes in labor supply, disappearing asymptotically. The cases of long-run invariance of hours worked, which depend upon the financing regime that accompanies the labor tax shift, are more likely to occur in the small-open economy than in the closed one. Some principles of public finance can be drawn from the differential payroll tax analysis of two-sector life-cycle economies. First of all, a qualitative equivalence in terms of the resource allocation between welfare entitlement and wealth tax financings of labor taxation emerges in the small-open economy. This equivalence does not hold for the closed economy, where the two types of budgetary schemes remain clearly distinct as long as the payroll tax effects are concerned. Second, government expenditure on the consumption good and consumption tax accommodations represent equivalent financing schemes in both closed and small-open economies. Third, also in the two-sector (like in the single-sector) setup, taxing nonhuman wealth in a closed economy or in a small-open economy is totally different. Hence, the macroeconomic implications of wealth tax financing differs substantially in the two cases. In fact, while in the closed economy, a labor tax cut accompanied by a hike in the wealth tax exerts adverse effects on the capital stock, nonhuman wealth and manhours, in the small-open economy such a payroll tax reduction spurs capital and nonhuman wealth formation, but is long-run immaterial for hours supplied. Furthermore, financing procedures based on public expenditure on the capital good or government labor adjustment are basically equivalent for the macroeconomic equilibrium, except for the disparate effect exerted on labor hours used in the capital-good sector. As the analysis of the paper has some limitations, it could be extended in several directions. First, our results have been obtained under the hypothesis that the capital-good-producing sector is labor-intensive. The case of a reversed assumption on sectoral factor-intensities should be investigated to detect the robustness of our findings.32 Second, we have ignored the role of government debt dynamics. This omission is particularly relevant as in our demographic setup Ricardian debt neutrality does not hold. The macroeconomic implications of a debt-financed payroll tax cut are very sensitive to the budget rules adopted to guarantee government solvency. Fiscal rules that arrest the explosion of public debt can contemplate either the automatic reduction of one type of government expenditure or the automatic increase of alternative tax rates when the issuance of debt takes place. Therefore, in our two-sector models, government debt financing of payroll tax reductions would imply several experiments according to the different solvency rules assumed. The consideration of government debt financing would be an important extension of the paper analysis. Third, as the rise in payroll taxes in many European countries in the last decades has been the result of population ageing (which led to the expansion of the social security systems, mainly organized on a “pay-as-you-go” basis), a life-cycle model with retirement would be required to properly discuss the macroeconomic implications of pension reforms aimed at alleviating the tax burden on labor. Unfortunately the Blanchard–Yaari model does not consider retirement; however, it could be easily amended to incorporate mandatory retirement, as done in Hoon and Phelps (2004). Finally, there is another important extension of our two-sector analysis that is worth exploring: the case of a labor market with structural unemployment. This modification, which is interesting per se for reconsidering all the experiments discussed in the paper, has also the advantage of making it possible to investigate in a dynamic general equilibrium context payroll tax cuts financed by reductions in unemployment benefits. Such a proposal for reforming the welfare state, largely debated in academic and political circles, has been mainly discussed through partial equilibrium frameworks.33

A recent analysis from the Penn Wharton Budget Model (PWBM) claims that expanding Social Security benefits along the lines of Rep. John Larson’s (D-Conn.) Social Security Act of 2100 (“the Act”) would slow economic growth. The model warrants a closer look, not just because it casts doubt on Social Security expansion, but because some of its dubious assumptions can be used against almost any policy that raises progressive taxes to pay for programs tilted in favor of low- and moderate-income Americans.

The Act, which has over 200 cosponsors, would increase payroll tax revenues to pay for expanded benefits while eliminating or greatly reducing Social Security’s long-term deficit. Among other things, the act would subject earnings above $400,000 to the Social Security payroll tax (earnings above $132,900 are not currently taxed); gradually raise the payroll tax rate; increase benefits in a progressive fashion;1 and change the consumer price index used for the cost-of-living adjustment to better match the higher inflation faced by seniors.

The House is scheduled to consider a bill this week to repeal the federal estate tax on inherited wealth, several weeks after approving a budget plan calling for $5 trillion in program cuts disproportionately affecting low- and moderate-income Americans.[1] Repealing the estate tax would be highly misguided — especially in the context of the House budget, which would repeal health reform and cut Medicaid deeply, causing tens of millions of Americans to become uninsured or underinsured; cut the Supplemental Nutrition Assistance program (SNAP, formerly known as food stamps), making it harder for millions of low-income families to put food on the table; and cut Pell Grants, raising the financial hurdle for people of modest means to attend college. (See Figure 1.)

Despite these and hundreds of billions of dollars in additional cuts that were largely unspecified, the House budget included no revenue increases. And while concerns of future deficits supposedly drive the budget’s harsh cuts, repealing the estate tax would significantly expand deficits.

Wealth inequality in the United States is rising more steeply to the already very rich, even more than the well-known rise in income inequality. The wealthiest 1 percent of families in the United States hold about 40 percent of all wealth and the bottom 90 percent of families hold less than one-quarter of all wealth. (See Figure 1.)

This gaping wealth divide has sparked proposals for sharply higher taxes on wealth. Taxing wealth is a promising way to raise revenues and deal with the deep historical skeins of economic inequality and structural racism exposed by the coronavirus and COVID-19, the disease it causes. There are many ways taxes on wealth could be reformed and expanded, including adoption of a wealth tax, switching to mark-to-market taxation of investment income, incremental reforms to the existing income tax, and adopting an inheritance tax. Recently, I and my co-authors William Gale, Christopher Pulliam, and Isabel Sawhill at The Brookings Institution proposed another approach—expanding the federal estate tax.

**Read this on state CP solvency against aff, suggests that the CP solves a sufficient portion of the aff

Based on these assumptions, we estimate that the cost-benefit ratio of having a billionaire estate tax in 2017 is 0.47 for the average state (with at least one billionaire), indicating that the the additional revenues from the estate tax exceeds the cost of foregone income tax revenues by a significant margin. Remarkably, despite the high elasticity of billionaires to state estate taxes, the gain for the average state from taxing the estates of the remaining billionaire population exceeds the loss of income tax flows from those billionaires that flee.