Papers

In the "sufficient statistics" approach, the optimal tax rate is usually expressed as a function of tax elasticities that are often endogenous to other policy instruments available to the tax authority, such as the level of information, enforcement, etc. In this paper we provide evidence that both the magnitude and the anatomy of tax elasticities are extremely sensitive to a particular policy instrument: the level of tax enforcement. We exploit a natural experiment that took place in France in 1983, when the tax administration tightened the requirements to claim charitable deductions. The reform led to a substantial drop in the amount of contributions reported to the administration, which can be credibly attributed to overreporting of charitable contributions before the reform, rather than to a real change in giving behaviours. We show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions. This finding allows us to partially identify the elasticity of overreporting contributions, which is shown to be large and inferior to -2 in the lax enforcement regime. We further show using bunching of taxpayers at kink-points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform. Our results suggest that failure to account for the effect of tax enforcement on both the magnitude and the anatomy of the elasticity of the tax base with respect to the net of tax rate can lead to misleading policy conclusions, both for the global optimal tax rate (when all policy instruments are optimized) and the local optimal tax rate (conditional on any other policy instrument).

This volume gathers contributions presented at a conference on Altruism and Charitable Giving jointly organized in May 2012 by the Center for Economic Research and its Applications (CEPREMAP), and the Public Policy group of the Centre for Economic Policy Research (CEPR). The conference was hosted by Paris School of Economics and sponsored by Cepremap. The motivation of the conference was to provide a forum for high-quality work in all areas related to the economics of altruism and charitable giving.

This paper measures consumption expenditures using registry data on income and asset holdings in Sweden and illustrates how a registry-based measure can alleviate some critical limitations of traditional survey measures in capturing changes in consumption inequality and consumption responses to shocks. In the construction of our measure, we build on previous work exploiting the identity coming from the household budget constraint between consumption expenditures and income net of savings. We try to improve this measure using more registry information to account for the contribution of both nancial and real assets to consumption ows. We demonstrate the power of the registry-based measure to study the relationship between income and consumption inequality, especially at the top of the income distribution. We also exploit the longitudinal dimension to study consumption responses to important life-time events and the dierent means used to smooth consumption.