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FRIHUMSAM-Fri prosj.st. hum og sam

Make Taxation Fair

Alternative title: Gjør Skatt Rettferdig

Awarded: NOK 11.8 mill.

Project Number:

315765

Application Type:

Project Period:

2021 - 2026

Location:

To better inform the public and academic debates around the rising inequality, the project TaxFair investigates three understudied issues of taxation. First, the project studies the pros and cons of capital income vs wealth taxation. Recent empirical research highlighted that returns of investments are different across individuals, difficult to measure, and sensitive to taxes. Building on a novel model and detailed register data to capture the complexity of investment returns, the project studies the optimal taxation of capital income and wealth for Norway. Second, the project addresses the taxation of housing. Housing wealth is special in many dimensions, as reflected in their tax treatment. Standard approaches disregard these dimensions. The project proposes short-term and long-term models of housing to investigate the implications of house taxes. Estimation and calibration procedures will fit the model to the Norwegian housing market. The main objective is to discuss how to set fair taxes on housing. Third, the project investigates the relationship between central and local taxation. Differences across regions and migration costs provide local governments with some tax freedom. The project studies the mechanisms behind local tax setting and the design of central/local tax systems. The project empirically compares the tax systems in Norway, US, and other OECD countries and analyzes optimal tax systems. When addressing these issues, the project adopts a novel methodology—the mapping approach—which associates the optimal taxation policy to each ethical views. This mapping is fundamental for welfare analysis and policy design. It offers an ethical menu for policymakers by identifying the optimal policy for each ethical view. Moreover, it provides an ethical identity of each policy proposal by identifying the ethical views a policymaker endorses when proposing a specific policy.

This project investigates three understudied issues of taxation, which recently emerged in the public and academic debate in light of the increasing concern for rising inequality. First, the project studies the pros and cons of capital income vs wealth taxation. Recent empirical research has highlighted the importance of heterogeneity and endogeneity of returns to investment and their difficult measurement. The project will construct a novel model to capture these facts, estimate the model with Norwegian register data, and study the optimal taxation of capital income and wealth for Norway. Second, the project addresses the taxation of housing. Housing wealth is special in many dimensions, as reflected in their tax treatment. Standard approaches disregard these dimensions. The project proposes short-term and long-term models of the housing market to investigate how the market reacts to changes in house taxes. Estimation and calibration procedures will allow the model to represent the functioning of the Norwegian housing market. The main objective is to discuss how to set fair taxes on housing. Third, the project addresses the relationship between central and local taxation. Differences across regions and migration costs provide local governments with some tax freedom. The project studies the mechanisms behind local tax setting and the design of central/local tax systems. The project empirically compares the tax systems in Norway, US, and other OECD countries and analyzes optimal tax systems. Importantly, the project adopts a novel methodology—the mapping approach—which associates the optimal taxation policy to each ethical view. This mapping is fundamental for welfare analysis and policy design. It offers an ethical menu for policymakers, by identifying the optimal policy for each ethical view. Moreover, it provides an ethical identity of each policy proposal, by identifying the ethical views a policymaker endorses when proposing a specific policy.

Activity:

FRIHUMSAM-Fri prosj.st. hum og sam