Tuesday, April 16, 2019
Eleanor Wilking (NYU) presents Tax Incidence with Heterogeneous Firm Evasion: Evidence from Airbnb Remittance Agreements at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks and Lilian Faulhaber:
How does assignment of the remittance obligation affect consumption tax incidence? In classical tax theory, the responsibility of transferring tax revenue has no effect on which party bears the economic burden of a consumption tax. I explore this prediction in the context of agreements between city governments and a large digital platform firm that shifted the obligation to remit hotel taxes from independent rentors to the platform firm itself. Using variation in the location and timing of such agreements, I estimate their effect on rental prices. My results indicate that shifting the remittance obligation to the platform increases after-tax prices, suggesting that consumers bear a greater share of the tax burden when the remittance obligation is shifted to a party with fewer evasion opportunities.