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on Accounting and Auditing |
| By: | Jesse Edgerton |
| Abstract: | This paper develops and tests the hypothesis that accounting rules mitigate the effect of tax policy on firm investment decisions by obscuring the timing of tax payments. I model a firm that maximizes a discounted weighted average of after-tax cash flows and accounting profits. I estimate the weight placed on accounting profits by comparing the effectiveness of tax incentives that do and do not affect them. Investment tax credits, which do affect accounting profits, have larger effects on investment than accelerated depreciation, which does not. This difference in estimated effects is not obviously driven by discounting, cash flow effects, or measurement error. Results thus suggest that accelerated depreciation provisions are less effective than they otherwise would be and that the corporate income tax could create smaller distortions to investment decisions than we would otherwise estimate. |
| JEL: | G31 H25 H32 M41 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18472&r=acc |
| By: | Duncan, Denvil (Indiana University); Peter, Klara Sabirianova (University of North Carolina, Chapel Hill) |
| Abstract: | This paper analyzes the effect of changes in structural progressivity of national income tax systems on observed and actual income inequality. Using several unique measures of progressivity over the 1981-2005 period for a large panel of countries, we find that progressivity reduces inequality in observed income, but has a significantly smaller impact on actual inequality, approximated by consumption-based GINIs. We show empirically that the differential effect on observed vs. actual inequality is much larger in countries with weaker legal institutions. Substantial differences in inequality response to changes in top vs. bottom rates are also uncovered. The paper discusses implications of these results for flat tax policies. |
| Keywords: | income inequality, Gini, personal income tax, structural progressivity, tax evasion |
| JEL: | H2 I3 J3 O1 O2 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6910&r=acc |
| By: | Nir Jaimovich; Sergio Rebelo |
| Abstract: | We study a model in which the effects of taxation on growth are highly non-linear. Marginal increases in tax rates have a small growth impact when tax rates are low or moderate. When tax rates are high, further tax hikes have a large, negative impact on growth performance. We argue that this non-linearity is consistent with the empirical evidence on the effect of taxation and other disincentives to investment and innovation on economic growth. |
| JEL: | H2 O4 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18473&r=acc |
| By: | Doerrenberg, Philipp (University of Cologne); Duncan, Denvil (Indiana University) |
| Abstract: | Motivated by the observation that access to evasion opportunities is distributed heterogeneously across the labor market, this paper examines the extent to which labor supply elasticities with respect to tax rates depend on such evasion opportunities. We first discuss the channels through which access to evasion affects labor supply responses and then set up a laboratory experiment in which all participants undertake a real-effort task over several rounds. Subjects face a tax rate, which varies across rounds and are required to pay taxes on earned income. The treatment group is given the opportunity to underreport income while the control group is not. We find that participants in the treatment group have significantly larger effort responses to changes in the net-of-tax rate than participants in the control group; suggesting that both groups indeed react differently to taxes. |
| Keywords: | lab experiment, taxable income, labor supply, tax evasion, taxes |
| JEL: | H21 H24 H26 J22 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6914&r=acc |
| By: | Berliant, Marcus; Fujishima, Shota |
| Abstract: | We consider the optimal nonlinear income taxation problem in a dynamic, stochastic environment when the government is sluggish in the sense that it cannot change the tax rule as uncertainty resolves. We argue that the zero top marginal tax rate result in static models is of little practical importance because it actually holds only when the top earner in the initial period receives the highest shock in every period. |
| Keywords: | Optimal income taxation; New dynamic public finance |
| JEL: | H21 |
| Date: | 2012–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41947&r=acc |
| By: | Stefanie Stantcheva (MIT); Emmanuel Saez (University of California Berkeley); Thomas Piketty (Paris School of Economics) |
| Abstract: | We then analyze top income and top tax rate data in 18 OECD countries. There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implyingthat the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:78&r=acc |
| By: | Torosyan, Karine (ISET, Tbilisi State University); Filer, Randall K. (Hunter College/CUNY) |
| Abstract: | This paper applies three different methods widely used in the literature to track changes in shadow economic activity in Georgia following a drastic tax reform in 2005. The first method is a currency demand approach based on macro level data. The second and third methods rely on micro data from household surveys. Overall, we find evidence that the amount of income underreporting decreased in the years following the reform. The biggest change is observed for households headed by a farmer, followed by "other" types of households where the head does not report any working status. Employed and self-employed households appear very similar before the tax reform and show minimal adjustment in income reporting in the post-reform period. Results, however, suggest that much of any difference may have come from increased enforcement efforts rather than rate changes. |
| Keywords: | consumer behavior, tax reform, hidden/shadow economy, transition economy |
| JEL: | E01 H26 J39 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6912&r=acc |