nep-pbe New Economics Papers
on Public Economics
Issue of 2008‒07‒14
five papers chosen by
Oliver Budzinski
Philipps-University of Marburg

  1. Fiscal Federalism: Analysis and Proposal By Federico Biagi
  2. Optimal Policy with Heterogeneous Preferences By Louis Kaplow
  3. Taxes and Benefits: Two Distinct Options to Cheat on the State? By Halla, Martin; Schneider, Friedrich
  4. Taxation and Economic Growth By Åsa Johansson; Chistopher Heady; Jens Arnold; Bert Brys; Laura Vartia
  5. Roles of Fiscal Policy in New Zealand By Felicity C Barker; Robert A Buckle; Robert W St Clair

  1. By: Federico Biagi (SDA Bocconi School of Management)
    Abstract: This paper discusses the main issues that the reform of the Italian fiscal federalism system will have to deal with: from the activities covered by the guarantee of art. 119 Const. to the identification of the taxes that will finance the expenses related to such activities; from the choice of the equalization mechanisms, to the analysis of the dynamic evolution of the system of intergovernmental relations. After such a discussion, conducted in the context of the Italian institutional system, we propose a model of fiscal federalism able to satisfy both efficiency and equity requirements. Finally, this paper critically discusses the main elements of the Governmental reform proposal contained in Decreto di Legge Delega n.3100, Sept. 2007.
    Date: 2008–03
  2. By: Louis Kaplow
    Abstract: Optimal policy rules--including those regarding income taxation, commodity taxation, public goods, and externalities--are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.
    JEL: D61 D62 D63 H21 H23 H24 H43 K34
    Date: 2008–07
  3. By: Halla, Martin (University of Linz); Schneider, Friedrich (University of Linz)
    Abstract: While there is an extensive literature on tax evasion a further aspect of cheating on the state, namely benefit fraud, has gained relatively modest attention in the economic literature. This paper seeks to fill this gap. We explore differences between benefit fraud and tax evasion due to differing social norms. We define the concepts of benefit morale and tax morale as the motivation to abstain from cheating on the state via these two offenses. Our multilevel analysis, based on a large micro data set of respondents from 29 OECD member countries, shows that benefit morale and tax morale have different determinants at an individual-level and respond differently to fiscal policy measures.
    Keywords: tax, subsidies, tax evasion, benefit fraud, welfare fraud, tax morale, benefit morale, social norms, multilevel analysis
    JEL: H20 H26 H44 A13
    Date: 2008–06
  4. By: Åsa Johansson; Chistopher Heady; Jens Arnold; Bert Brys; Laura Vartia
    Abstract: This paper investigates the design of tax structures to promote economic growth. It suggests a “tax and growth” ranking of taxes, confirming results from earlier literature but providing a more detailed disaggregation of taxes. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes. Recurrent taxes on immovable property appear to have the least impact. A revenue neutral growth-oriented tax reform would, therefore, be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption. The paper breaks new ground by using data on industrial sectors and individual firms to show how re-designing taxation within each of the broad tax categories could in some cases ensure sizeable efficiency gains. For example, reduced rates of corporate tax for small firms do not seem to enhance growth, and high top marginal rates of personal income tax can reduce productivity growth by reducing entrepreneurial activity. While the paper focuses on how taxes affect growth, it recognises that practical tax reform requires a balance between the aims of efficiency, equity, simplicity and revenue raising. <P>Fiscalité et croissance économique <BR>Ce document examine la meilleure élaboration du système fiscal afin de promouvoir la croissance économique. Il suggère une classification des impôts selon le modèle « fiscalité et croissance », venant étayer des résultats déjà connus dans des publications antérieures, mais proposant une ventilation plus détaillée des différents impôts. Il s’avère que les impôts sur les sociétés grèvent le plus la croissance, suivis par les impôts sur le revenu des personnes physiques, et ensuite les impôts sur la consommation. Les impôts sur l’immobilier semblent les moins nocifs. Une réforme fiscale sans incidence sur les impôts et orientée sur la croissance consisterait à transférer une partie de la base imposable des impôts sur le revenu sur des impôts moins générateurs de distorsion, comme les impôts récurrents sur l’immobilier ou ceux sur la consommation. Ce document est innovant dans la mesure où il utilise des données sur les secteurs industriels et les sociétés individuelles afin de démontrer que le fait d’élaborer une nouvelle fiscalité au sein d’une large catégorie d’impôts pourrait, dans certains cas, permettre un gain d’efficacité non négligeable. Par exemple, des taux réduits d’impôts sur les sociétés pour les petites entreprises ne semble pas augmenter favoriser la croissance; de même, des taux marginaux élevés d’impôts sur les revenus des personnes physiques peut réduire la courbe de la productivité en réduisant l’activité entrepreneuriale. Alors que ce document est centré sur la manière dont les impôts affectent la croissance, il reconnaît qu’une réforme fiscale pragmatique nécessite un équilibre entre efficience, équité, simplicité et levée d’impôts.
    Keywords: taxation, economic growth, productivity, croissance économique, productivité, investment, investissement, tax policy, politique fiscale, imposition, tax design, conception fiscale
    JEL: C33 H23 H24 H25 O40 O43
    Date: 2008–07–03
  5. By: Felicity C Barker; Robert A Buckle; Robert W St Clair (The Treasury)
    Abstract: Economic growth is one of the objectives of the current government. Fiscal policy, encompassing government expenditure and taxation decisions, can significantly impact on economic growth. This paper proposes a framework which views fiscal policy through three lenses and applies this approach to consider how fiscal policy affects economic growth. The three lenses are: fiscal sustainability, fiscal structure and fiscal stabilisation. The paper reviews international literature pertaining to these three lenses and discusses the extent to which these lenses are incorporated into New Zealand’s current fiscal framework. Contemporary New Zealand fiscal challenges are discussed and, in light of these challenges, the paper concludes with consideration of areas to investigate which may yield improvements to the New Zealand fiscal framework.
    Keywords: Fiscal policy, sustainability, stability, structure, taxation, government spending, economic growth
    JEL: E6 E61 E62 E63
    Date: 2008–06

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