2023/28 | LEM Working Paper Series | ||||||||||||||||
In search of lost time: An ensemble of policies to restore fiscal progressivity and address the climate challenge |
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Demetrio Guzzardi, Elisa Palagi, Tommaso Faccio and Andrea Roventini |
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Keywords | |||||||||||||||||
Taxation; Inequality; Wealth tax; Capital gains tax; Corporate tax; Climate
change.
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JEL Classifications | |||||||||||||||||
D31, H2, H5
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Abstract | |||||||||||||||||
The European Union needs to raise significant resources to finance a just green
transition. At the same time, there is a widespread fiscal regressivity in many EU countries.
Indeed, recent empirical evidence shows that the tax systems of many EU members
are characterized by low degrees of progressivity, with high-income groups paying
lower effective tax rates vis-a-vis middle- and low-income classes. In order to jointly
tackle such issues, we propose an ensemble of tax policies at the EU level grounded
on the recent proposals advanced in the literature. This fiscal reform includes a wealth
tax targeting the top 1% of wealth holders, a tax on unrealized capital gains, and an
increase of the minimum corporate tax. Our first estimates suggest that these measures
can generate substantial yearly revenues in the order of 1.9%-2.9% of EU GDP. Such
resources can contribute to the funding of the additional climate mitigation and
adaptation policies required to tackle the climate emergency, while reducing inequality, thus
contributing to put EU economies on sustainable and inclusive growth pathways.
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