nep-pbe New Economics Papers
on Public Economics
Issue of 2015‒04‒02
seventeen papers chosen by
Thomas Andrén

  1. Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment By Owen M. Zidar
  2. A Different Approach of Tax Progressivity Measurement By Govori, Florije
  3. Allocating Tax Revenue to Sub-Central Government Levels: Lessons from Germany and Poland By Malgorzata Magdalena Hybka
  4. Taxation and Poverty By Christopher P. Chambers; Juan D. Moreno-Ternero
  5. Tax Agents Perceptions of the Corporate Taxpayers’ Compliance Costs under the Self-assessment System By Noor Sharoja Sapiei
  6. Pareto Weights in Practice: Income Inequality and Tax reform By Bo Hyun Chang; Yongsung Chang; Sun-Bin Kim
  7. International spillovers from U.S. fiscal policy shocks By Nicar, Stephen
  8. Inequality and the composition of taxes By Andrew Pickering; Sheraz Rajput
  9. Evolution of Approaches to Financing Government Spending: Tax and Debt Policy By Sokolov, Ilya
  10. The Taxation of Foreign Profits: a Unified View By Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
  11. On the redistributive efficiency of fiscal policy By Kyriacou, Andreas; Muinelo-Gallo, Leonel; Roca-Sagalés, Oriol
  12. Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up By Rozema, Kyle; Ziebarth, Nicolas R.
  13. Taxing Wealth By McGrattan, Ellen R.
  14. Earnings, disposable income, and consumption of allowed and rejected disability insurcance applicants By Andreas Ravndal Kostøl; Magne Mogstad
  15. Wealth Inequality, Family Background, and Estate Taxation By Mariacristina De Nardi; Fang Yang
  16. Non-Keynesian Effects of Fiscal Consolidations in Central Europe in the years 2000-2013 By Adam P. Balcerzak; Elzbieta Rogalska
  17. Local Administration Systems and Local Democracy Perception By Hayriye Sagir; Hacer TuÄŸba Eroglu

  1. By: Owen M. Zidar
    Abstract: This paper investigates how tax changes for different income groups affect aggregate economic activity. I construct a measure of who received (or paid for) tax changes in the postwar period using tax return data from NBER's TAXSIM. I aggregate each tax change by income group and state. Variation in the income distribution across U.S. states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and that the effect of tax cuts for the top 10% on employment growth is small.
    JEL: E32 E62 H2 H20 H31 N12
    Date: 2015–03
  2. By: Govori, Florije
    Abstract: Measuring income tax progression is a matter of many debates among groups with specific social interests. These debates are a consequence of disagreements regarding the model they prefer for measuring income tax progression. For this reason, authors with interest in this field suggest different measuring methods. As such, values resulting from these measurements differ for a given tax system, and neglect to show any relation of tax progression in a given level of income with the prior level of income tax. In this paper, a new model of measuring income tax progression is introduced, one that takes into account income levels as related to previous income tax levels.
    Keywords: income tax; tax progression; tax liability; measuring income tax progression
    JEL: H2 H20 H21
    Date: 2015–01
  3. By: Malgorzata Magdalena Hybka (Uniwersytet Ekonomiczny w Poznaniu)
    Abstract: Tax sharing arrangements provide considerable financial resources to sub-central government levels. This statement is true both for unitary and federal states although tax revenue sharing mechanisms differ significantly across countries. The basic aim of this article is to compare the mechanisms adopted in Germany and in Poland. It assesses the degree of tax autonomy granted to sub-central government levels in the countries analysed, overviews the principles of apportionment of joint (shared) taxes and presents statistics on tax revenue composition of sub-central government levels.
    Keywords: apportionment of tax revenue, fiscal federalism, Germany, Poland
    JEL: H2 H7
    Date: 2015–03
  4. By: Christopher P. Chambers (University of California at San Diego); Juan D. Moreno-Ternero (U. Pablo de Olavide y CORE, Université catholique de Louvain)
    Abstract: We explore the implications of four natural axioms in taxation: continuity (small changes in the data of a taxation problem should not lead to large changes in the tax allocation), equal treatment of equals (agents with the same pre-tax incomes pay equal taxes), consistency (the way in which a group allocates a tax burden is immune to secessions of taxpayers) and composition down (an increase in the tax burden is handled according to agents' current post-tax incomes). The combination of the four axioms characterizes a large family of rules, which we call generalized equal-sacrifice rules, encompassing the so-called equal-sacrifice rules (such as the flat tax), as well as constrained equal-sacrifice rules (such as the head tax), and exogenous poverty-line rules (such as the leveling tax, and some of its possible compromises with the previous ones).
    Keywords: taxation, poverty, equal sacrifice, consistency, composition.
    JEL: D63
    Date: 2015–03
  5. By: Noor Sharoja Sapiei (University of Malaya)
    Abstract: Reforms and changes in tax laws may affect the level of complexity in the tax system and increase taxpayer compliance costs burden. In Malaysia, the introduction of Self-assessment System (SAS) imposes greater accountability in terms of computational, recordkeeping and filing requirements upon taxpayers. The increase in taxpayer obligations coupled with higher possibility of audit may require taxpayers to seek assistance from tax agents to handle tax matters on their behalf. In spite of the expanding role of tax agents in tax reporting under the SAS, very little research has been directed at examining their views and perceptions. This study, therefore, evaluates the compliance costs of corporate taxpayers from the perspective of tax agents.
    Keywords: Tax Compliance Costs, Self-assessment System, Tax Agents, Corporate Taxpayers, Corporate Income Tax
    JEL: H26 M29 M49
    Date: 2014–05
  6. By: Bo Hyun Chang (University of Rochester); Yongsung Chang (University of Rochester, Yonsei University); Sun-Bin Kim (Yonsei University)
  7. By: Nicar, Stephen
    Abstract: I estimate the effect of U.S. government spending and tax shocks on Canada, Japan, and the U.K. for the period 1974 through 2007. Spending and tax shocks are identified using sign restrictions on the impulse responses from a vector autoregression (VAR). I find that while spillover effects of expansionary fiscal shocks are not uniform in direction or magnitude across countries, for Canada and Japan they result in economically significant GDP increases over some portion of the response horizon. For all three countries, government spending shocks generally have larger effects than net tax shocks. Altogether, the results support the idea that some countries may benefit significantly from expansionary U.S. fiscal policy.
    Keywords: Fiscal policy, International Transmission, Spillovers, VAR models, Sign Restriction
    JEL: C32 E62 F42
    Date: 2014–08
  8. By: Andrew Pickering; Sheraz Rajput
    Abstract: This paper analyzes the political economics of the composition of taxes. Taxes may be levied on income, or on expenditure, and the median voter is pivotal in the theoretical framework analyzed. As in Meltzer and Richard (1981) income taxes increase with inequality. Conversely expenditure taxes first increase and then decrease with increasing inequality. The extent to which taxes are levied on income relative to expenditure unambiguously rises with inequality. Cross-country data exhibit a robust positive correlation between the extent to which taxes are levied on income relative to expenditure, and inequality. Consistent with the theory this relationship holds most significantly in stronger democracies.
    Keywords: tax structure, inequality
    JEL: D78 E62 H20
    Date: 2015–03
  9. By: Sokolov, Ilya (Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The research of evolution and proportion of tax and debt financing of government expenditures allowed to systemize factors and conditions impacting on the government option: whether to finance expenditures with a government debt or taxes. Following research step was devoted to the detailed consideration of the government debt influence on macroeconomic indicators mainly on the GDP. Examination of the world experience concerning the possible government debt level revealed the absence of the recognized common free of risk level due to the unique country’s macroeconomic performance and credit history. Moreover it was examined the world trends of financing government expenditures which reflected both the direct relationship between fiscal sustainability and economic growth and current excessive amount of the government debt. At last hypothesis empirical test was carried out to identify the tax pressure and government debt influence on fiscal sustainability.
    Keywords: tax, debt, government, GDP
    Date: 2014–06
  10. By: Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
    Abstract: This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model, notably (i) when a profit-shifting motive is present; (ii) to some extent, when a corporate income tax is in place. The introduction of tax administration costs into the model can explain the empirical trend towards use of the exemption regime.
    Keywords: corporate taxation; multinational firms; repatriation
    JEL: F23 H25
    Date: 2015–03
  11. By: Kyriacou, Andreas; Muinelo-Gallo, Leonel; Roca-Sagalés, Oriol
    Abstract: This article analyses the redistributive efficiency of public spending and taxation in a panel of both advanced and developing economies during the last three decades (1984-2012). In order to explore how redistribution is achieved through fiscal policies, a two-stage approach is applied. First, we evaluate the redistributive efficiency of public spending and taxes by using Data Envelopment Analysis (DEA) and obtain considerable variation in redistributive efficiency scores across countries. Second, we use panel truncated and OLS regression analysis to identify the determinants of these differences and reveal the crucial role of economic development, government quality and demographic factors.
    Keywords: government efficiency, redistribution, fiscal policy, data envelopment analysis, panel data
    JEL: E02 E62 H11 H53
    Date: 2015–03–27
  12. By: Rozema, Kyle (Cornell University); Ziebarth, Nicolas R. (Cornell University)
    Abstract: This paper investigates a previously unexplored behavioral response to taxation: whether smokers compensate for higher cigarette taxes by enrolling in food stamps. First, we show theoretically that increases in cigarette taxes can induce food stamp take-up of non-enrolled, eligible smoking households. Then, we study the theoretical predictions empirically by exploiting between and within-household variation in food stamp enrollment from the Current Population Survey as well as data from the Consumer Expenditure Survey. The empirical evidence strongly supports the model predictions. Higher cigarette taxes increase the probability that low-income smoking households take-up food stamps.
    Keywords: cigarette taxes, food stamp take-up, tax pass-through rate, unintended consequences
    JEL: L66 H21 H23 H26 H71 I18
    Date: 2015–03
  13. By: McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis)
    Abstract: Some have proposed wealth taxation as a means of reducing economic inequality, but such proposals are premature. While economic theory and data measurement have solid grounding when analyzing other forms of taxation, such as income or sales taxes, this is not the case for wealth Total estimates of the two most widely used measures of wealth, fixed assets and net worth, vary widely over the six decades for which data are available. Trend lines in these two wealth measures are rarely correlated. In addition, the relationship between the two—and explanation of why they differ so radically—remains a theoretical puzzle for economists. Given this state of affairs, accurate predictions for the impact, and design, of wealth taxation policies are not yet possible.
    Date: 2015–03–24
  14. By: Andreas Ravndal Kostøl; Magne Mogstad (Statistics Norway)
    Abstract: Two key questions in thinking about the size and growth of the disability insurance program are to what extent it discourages work, and how valuable the insurance is to individuals and families. These questions motivate our paper. We begin by describing the earnings, disposable income and consumption of awarded and rejected DI applicants, before and after the disability onset and the allowance decision. Next, we discuss how these descriptive results can be interpreted through the lens of alternative empirical approaches. Our analysis uses a Norwegian population panel data set with detailed information about every individual and household.
    Keywords: disability insurance; labor supply; benefit substitution; disposable income
    JEL: I38 J62 H53
    Date: 2015–03
  15. By: Mariacristina De Nardi; Fang Yang
    Abstract: This paper provides two main contributions. First, it provides a new theory of wealth inequality that merges two forces generating inequality: bequests motives and inheritance of ability of across generations; and an earnings process that allows for more earnings risk for the richest. Second, it uses a calibrated framework to study the effects of changing estate taxation on inequality, aggregate capital accumulation and output, the economic advantage of being born to a given parental background, and welfare. Our calibrated model generates realistically skewed distributions for wealth, earnings, and bequests, and implies that parental background is a crucial determinant of one’s expected lifetime utility. We find that increasing the estate tax rate would significantly reduce wealth concentration in the hands of the richest few, and would reduce the economic advantage of being born to a super-rich family, but also would lower aggregate capital and output. Lastly, it would also generate a significant welfare gain from the ex-ante standpoint of a newborn under the veil of ignorance.
    JEL: D1 D14 D31 E21 E6 H2
    Date: 2015–03
  16. By: Adam P. Balcerzak (Nicolaus Copernicus University, Poland); Elzbieta Rogalska (University of Warmia and Mazury)
    Abstract: Last two decades were a period of significant discussion concerning determinants of effectiveness of fiscal policy. After some cases of expansionary episodes of fiscal consolidations in eighties of XX century, an intensive international research on the possibility of non-Keynesian effects of fiscal contractions in highly developed countries has started. The aim of the article is to analyze the possibility of obtaining non-Keynesian effects of fiscal consolidations in post-transformation countries of Central Europe. An important aim of macroeconomic policy in the analyzed economies is to benefit the advantages of convergence process. Thus, the empirical analysis is made within conditional ß-convergence framework. The verification of hypothesis of ß-convergence enables to identify the long term tendency of output per capita, in the same time it enables to identify non-Keynesian effects of fiscal prudence and to assess their role in the process of reducing GDP gap between the analyzed economies. Then the potential transmission channels for non-Keynesian effects of fiscal policy were analyzed. In the research the data from Eurostat and European Commission for the years 2000-2013 was used. The paper provides arguments in favor of the existence of non-Keynesian effects of fiscal consolidations in Central Europe that support the process of conditional convergence.
    Keywords: fiscal policy, fiscal consolidations, non-Keynesian effects, ß-conditional convergence, Central Europe
    JEL: H3
    Date: 2015–03
  17. By: Hayriye Sagir (SELCUK UNIVERSITY); Hacer TuÄŸba Eroglu (SELCUK UNIVERSITY)
    Abstract: Institutions which are subunits of a government or regional administration and authorized as defining limited number of public policies in relatively small area and implicating these policies are defined as public institutions and local administrations. The existence reasons of local administrations enforce some services which will be presented to public not by the government centre but by the public entities which are not included in centralized administration hierarchy and in centralized management organizations. There are two types of the term’ decentralisation’ which are governmental decentralisation and political decentralisation. If the authority transferred by centralized management is limited with legislation and to a certain degree with jurisdiction it is Political decentralisation which is special to federal states, if the authorities transferred by centralized management is limited only with enforcement it is governmental decentralisation. The first target to be reached in democracies is to make the public have rights in administration. The prior purpose in countries which has the tradition of democratic administration is to include the public in each step of administration and decision making. Public’s participation in administration process and public’s having rights in administration are easy is local administrations. In this direction, this study’s main subject will be local administration systems and the relation of systems with democratic administration.
    Keywords: Local Administration, Local Administration Systems, Local Democracy, Participation
    JEL: H70 H76 H79
    Date: 2014–10

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