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on Public Economics |
| By: | Bach, Stefan; Corneo, Giacomo; Steiner, Viktor |
| Abstract: | This paper provides formulas for optimal top marginal tax rates when couples are taxed according to income splitting between spouses, consumption is taxed, and the skill distribution is unbounded. Optimal top marginal income tax rates are computed for Germany using a dataset that includes the tax returns of all German top taxpayers. We find that the optimal top marginal tax rate converges to about 2/3 and convergence obtains at income levels that are substantially higher than those currently subject to the actual top tax rate. -- |
| Keywords: | optimal income taxation,top incomes,German income tax |
| JEL: | D31 D72 H23 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:201121&r=pbe |
| By: | Manel Antelo (Universidad de Santiago de Compostela) |
| Abstract: | In this paper the behavior of a tax-collecting government (a tax office) when imposing a quantity-tax to firms is analyzed along a two-period signaling model. Each taxpayer privately knows its technological attributes, while third parties—the tax office among them—have only a prior belief about this fact, so firms can be tempted to behave opportunistically. In monopoly, signaling is always costly in terms of output deviation and the tax office reacts by setting, a smaller tax in (asymmetric information) period 1 than it would under symmetric information. In oligopoly, signaling can be either costly or costless. In the former case, the tax imposed by the tax office to each firm is below that imposed under symmetric information, while it is equal in the latter case. Besides, fiscal revenue under signaling is unambiguously lower than under symmetric information, even when tax size is the same in both contexts |
| Keywords: | Output-tax, tax office, asymmetric information, signaling |
| JEL: | H21 D82 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cea:doctra:e2011_03&r=pbe |
| By: | Dwenger, Nadja; Rattenhuber, Pia; Steiner, Viktor |
| Abstract: | This study assesses the burden of capital income tax passed onto labor through wage bargaining over economic rents, using estimations based on a unique pseudo-panel data set from Germany for the period 1998 to 2006. Tax return data cover the universe of corporations subject to corporate income tax, and labor market variables reflect the full record of employees covered by Social Security. We find that wage bargaining after a reduction in tax rates does not increase the wage bill if employment effects neglected by previous empirical studies are taken into account. Any increase in the total wage bill by higher wage rates set is equally compensated for by lower levels of employment. If adjustments in employment due to the increased user cost of capital are taken into account, a cut in corporate income taxes by 1 euro increases the wage bill by 0.47 euro. The identification of these effects comes from variation in the firm-specific average corporate tax rate across firms and over time resulting from two substantial tax reforms. The endogeneity of the firmspecific tax rate is controlled for by an instrumental variable approach. The instrument for the observed average tax rate is the counterfactual tax rate that a corporation would have faced in a particular period, had there been no endogenous change of its tax base, constructed using a detailed microsimulation model. -- |
| Keywords: | tax incidence,wage determination,corporate income taxation,corporate tax return data |
| JEL: | H22 H25 J21 J31 H32 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:201119&r=pbe |
| By: | R. Alison Felix; James R. Hines, Jr. |
| Abstract: | Many American communities seek to attract or retain businesses with tax abatements, tax credits, or tax increment financing of infrastructure projects (TIFs). The evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes, if they are located close to state borders, and if their states have troubled political cultures. Ten percent greater median household income is associated with a 3.2 percent lower probability of offering incentives; ten percent greater distance from a state border is associated with a 1.0 percent lower probability of offering incentives; and a 10 percent higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2 percent greater probability of offering business incentives. TIFs are the preferred incentive of communities whose residents have household incomes between $25,000 and $75,000; whereas TIFs are much less commonly offered by communities whose residents have household incomes below $25,000. The need to finance TIFs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use TIFs for local business development. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp11-05&r=pbe |
| By: | Mauricio Cárdenas; Didem Tuzemen |
| Abstract: | Existing studies have shown that the state's ability to tax, also known as fiscal capacity, is positively related to economic development. In this paper, we analyze the determinants of the government's decision to invest in state capacity, which involves a trade-off between present consumption and the ability to collect more taxes in the future. Using a model, we highlight some political and economic dimensions of this decision and conclude that political stability, democracy, income inequality, as well as the valuation of public goods relative to private goods, are important variables to consider. We then test the main predictions of the model using cross-country data and find that state capacity is higher in more stable and equal societies, both in economic and political terms, and in countries where the chances of fighting an external war are high, which is a proxy for the value of public goods. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp11-07&r=pbe |
| By: | Jürgen Antony; Michiel Bijlsma; Adam Elbourne; Marcel Lever; Gijsbert Zwart |
| Abstract: | <p>We explore whether a Financial Transactions Tax (FTT) is likely to correct the market failures that have contributed to the financial crisis, to what extent FTT succeeds in raising revenues, and how the FTT compares to alternative taxes in terms of efficiency.</p><p>We find little evidence that the FTT will be effective in correcting market failures. Taxing of transactions is not well targeted at behaviour that leads to excessive risk and systemic risk creation. The empirical evidence does not suggest that the introduction of an FTT reduces volatility or asset price bubbles. An FTT will likely raise significant revenues and we estimate those revenues for the Netherlands. In the short term, the incidence of the tax will be chiefly on the current holders of securities. Ultimately, the tax will be borne in part by end users, and we estimate the likely effects on economic growth. When compared to alternative forms of taxation of the financial sector, the FTT is likely less e fficient given the amount of revenues. In particular, taxes that more directly address existing distortions, such as the current VAT exemption for banks, and the bias towards debt financing, provide more efficient alternatives.<br /> </p> |
| JEL: | G18 H21 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:202&r=pbe |
| By: | Lockwood, Ben (University of Warwick) |
| Abstract: | This paper considers the optimal taxation of savings intermediation and payment services in a dynamic general equilibrium setting, when the government can also use consumption and income taxes. When payment services are used in strict proportion to …nal consumption, and the cost of intermediation services is …xed and the same across …rms, the optimal taxes are generally indeterminate. But, when …rms di¤er exogenously in the cost of intermediation services, the tax on savings intermediation should be zero. Also, when household time and payment services are substitutes in transactions, the optimal tax rate on payment services is determined by the returns to scale in the conditional demand for payment services, and is generally di¤erent to the optimal rate on consumption goods. In particular, with constant returns to scale, payment services should be untaxed. These results can be understood as applications of the Diamond-Mirrlees production e¢ciency theorem. Finally, as an extension, we endogenize intermediation, in the form of monitoring, and show that it may be oversupplied in equilibrium when banks have monopoly power, justifying a Pigouvian tax in this case. |
| Keywords: | Financial intermediation services, tax design, banks, monitoring,payment services |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cge:warwcg:64&r=pbe |
| By: | William B. Peterman |
| Abstract: | This paper considers the impact of endogenous human capital accumulation on optimal tax policy in a life cycle model. Including endogenous human capital accumulation, either through learning-by-doing or learning-or-doing, is analytically shown to create a motive for the government to use age-dependent labor income taxes. If the government cannot condition taxes on age, then it is optimal to use a tax on capital in order to mimic such taxes. Quantitatively, introducing learning-by-doing or learning-or-doing increases the optimal tax on capital by forty or four percent, respectively. Overall, the optimal tax on capital is thirty five percent higher in the model with learning-by-doing compared to the model with learning-or-doing implying that how human capital accumulates is of significant importance when determining the optimal tax policy. |
| Keywords: | Capital ; Human capital ; Taxation |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2012-03&r=pbe |
| By: | Charles F. Manski |
| Abstract: | The merits of alternative income tax policies depend on the population distribution of preferences for income, leisure, and public goods. Standard theory, which supposes that persons want more income and more leisure, does not predict how they resolve the tension between these desires. Empirical studies of labor supply have been numerous but have not shed much light on the matter. A persistent problem is that empirical researchers have imposed strong preference assumptions that lack foundation. This paper examines anew the problem of inference on preferences and considers the implications for comparison of tax policies. I first perform a basic revealed-preference analysis that imposes no assumptions on the preference distribution beyond the presumption that persons prefer more income and leisure. This shows that observation of a person’s labor supply under a status quo tax policy may bound his labor supply under a proposed policy or may have no implications, depending on the shapes of the two tax schedules and the location of status quo labor supply. I next explore the identifying power of two assumptions restricting the population distribution of income-leisure preferences. One assumes that groups of persons who face different choice sets have the same distribution of preferences, while the other adds restrictions on the shape of this distribution. I then address utilitarian policy comparison with partial knowledge of preferences. Partial knowledge of preferences implies partial knowledge of the welfare function. Hence, it may not be possible to rank policies. |
| JEL: | C14 C25 H21 H24 J22 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17755&r=pbe |
| By: | Zhou, Li (University of Alberta, Department of Economics) |
| Abstract: | This paper proposes a commercial development model, based on Fujitas (1988) monopolistic com- petition model of spatial agglomeration, to examine storesdecisions to enter urban communities. The model focuses on commercial developers and large stores, and identi fies a potential holdup problem in the commercial development market arising because developers incur costs before negotiating with anchor tenants over pro fit sharing; the holdup problem is more likely to occur in low-income communities where the pro fitability of commercial projects is small. The model predicts that direct incentives to developers are preferred to general tax incentives for addressing this market failure. |
| Keywords: | urban redevelopment programs; economic agglomeration; holdup problem |
| JEL: | H50 H76 R58 |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2012_004&r=pbe |
| By: | Jason M. DeBacker; Bradley T. Heim; Anh Tran |
| Abstract: | This paper studies how cultural norms and enforcement policies influence illicit corporate activities. Using confidential IRS audit data, we show that corporations with owners from countries with higher corruption norms engage in higher amounts of tax evasion in the U.S. This effect is strong for small corporations and decreases as the size of the corporation increases. In the mid-2000s, the United States implemented several enforcement measures which significantly increased tax compliance. However, we find that these enforcement efforts were less effective in reducing tax evasion by corporations whose owners are from countries with higher corruption norms. This suggests that cultural norms can be a challenge to legal enforcement. |
| JEL: | D73 H25 M14 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17770&r=pbe |
| By: | Jones, Benjamin; Keen, Michael; Strand, Jon |
| Abstract: | This paper provides a primer on the fiscal implications of climate change, in particular the policies for responding to it. Many of the complicated challenges that arise in limiting climate change (through greenhouse gas emissions mitigation), and in dealing with the effects that remain (through adaptation to climate change impacts), are of a fiscal nature. While mitigation has the potential to raise substantial public revenue (through charges on greenhouse gas emissions), adaptation largely leads to fiscal outlays. Policies may unduly favor public spending (on technological solutions to limit emissions, and on adaptation), over policies that lead to more public revenue being raised (emissions charges). The pervasive uncertainties that surround climate change make the design of proper policy responses even more complex. This applies especially to policies for mitigation of emissions, since agreement on and international enforcement of cooperative abatement policies are exceedingly difficult to achieve, and there is as yet no common view on how to compare nearer-term costs of mitigation to longer-term benefits. |
| Keywords: | Climate Change Mitigation and Green House Gases,Climate Change Economics,Carbon Policy and Trading,Energy Production and Transportation,Environment and Energy Efficiency |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5956&r=pbe |