Estimating Policy-Corrected Long-Term and Short-Term Tax Elasticities for the United States, Germany, and the United Kingdom
Bernd Hayo (),
Sascha Mierzwa () and
Umut Unal ()
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Sascha Mierzwa: University of Marburg
MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
We estimate the elasticities of the most important tax categories using a new quarterly database of discretionary tax measures for the United States, Germany, and the United Kingdom over the period 1980Q1 to 2018Q2. Employing Romer and Romerâ€™s (2009) narrative approach, we construct a policy-neutral dataset based on revenue figures from governmental records. Using this quantitative information, we are able to subtract policy-induced changes, which are typically not considered in the extant literature. Furthermore, we estimate state-dependent elasticities. Our conclusions are as follows. (i) In Germany and the UK, long-term tax-to-base elasticities are generally higher than short-term elasticities, whereas results for the US are mixed. (ii) Short-term base-to-output elasticities tend to be smaller than unity, whereas long-term elasticities are close to unity. (iii) German and UK tax-to-output elasticities in the short term are lower than long-term elasticities, with mixed results for the US. (iv) For tax-to-base elasticities, we find business cycle asymmetries across countries but not within countries. (v) For base-to-output elasticities, our results suggest few asymmetries across countries and more asymmetries across tax types. (vi) Typically, the above conclusions do not hold for corporate income tax.
Keywords: Tax revenue; tax base; tax elasticity; business cycle; Germany; United Kingdom; United States (search for similar items in EconPapers)
JEL-codes: E32 E62 H20 H30 (search for similar items in EconPapers)
Pages: 31 pages
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202112
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