nep-pbe New Economics Papers
on Public Economics
Issue of 2019‒08‒12
eleven papers chosen by
Thomas Andrén

  1. Slippery slope framework, tax morale and tax compliance: a theoretical integration and an empirical assessment By Gaetano Lisi
  2. On the political economy of state corporate tax reforms in the U.S. By Kakpo, Eliakim
  3. Labor supply, taxation and the use of the tax revenues: A real-effort experiment in Canada, France, and Germany By Keser, Claudia; Masclet, David; Montmarquette, Claude
  4. Tax reform, wages, and employment: Evidence from Ohio By Kakpo, Eliakim
  5. The corporate tax, apportionment rules and employment: Evidence using policy discontinuity at U.S. state borders By Kakpo, Eliakim
  6. A supply-demand model of the size of public sector and Wagner's law By Fedotenkov, Igor; Idrisov, Georgy
  7. Business Tax Policy under Default Risk By Nicola Comincioli; Sergio Vergalli; Paolo M. Panteghini
  8. Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions? By Antoine Bozio; Thomas Breda; Julien Grenet
  9. Are environmental tax policies beneficial?: Learning from programme evaluation studies By Jonas Teusch; Nils Axel Braathen
  10. Pareto-efficient Tax Deductions By Sebastian Koehne; Dominik Sachs
  11. Tax reform in Brazil: guiding principles and proposals under debate By Rodrigo Octávio Orair; Sergio Wulff Gobetti

  1. By: Gaetano Lisi (University of Cassino)
    Abstract: Many empirical works confirmed the capacity of the "slippery slope" framework and tax morale in explaining tax compliance. So far, however, very few studies tried to fully integrate these two main behavioral approaches to understanding tax compliance. Indeed, a theoretical underpinning is still missing. In this paper, therefore, we first introduce tax morale and the “slippery slope” framework into an economic model of taxpayer’s behavior and then we test it empirically. We find that for increasing overall tax compliance, voluntary tax compliance (trust and tax morale) is more effective than enforced tax compliance. Eventually, from a policy point of view, we suggest a strategy based on rewards for honest taxpayers.
    Keywords: tax compliance, tax evasion, voluntary tax compliance, tax morale, enforced tax compliance
    JEL: H26 H3 K42 D22
    Date: 2019–07
  2. By: Kakpo, Eliakim
    Abstract: This paper discusses the political economy of U.S. state corporate tax reforms. Using a unique dataset of state effective corporate tax rates over the period 1969-2015, I observe that business tax changes are associated with tax competition, swings in economic cycles, and left-right political ideology. In contrast, long-term debt and budgetary pressures do not correlate with state corporate tax policies. Moreover, I document a regional heterogeneity and notice a slowdown in state tax changes after the Federal Reform Act of 1986. These findings matter for the empirics of corporate tax incidence, which is increasingly concerned with the endogeneity between tax reforms and other economic developments.
    Keywords: Tax reform, Tax competition, Tax incidence, State public debt, State budget
    JEL: H71 H72 H73
    Date: 2018–08
  3. By: Keser, Claudia; Masclet, David; Montmarquette, Claude
    Abstract: Is the labor supply of individuals influenced by their perception of how their income taxes will reflow to them or be wasted in administrative expenditures? We examine this issue experimentally by comparing three different treatments of a real-effort game that vary in the degree of redistribution. At one extreme, the Leviathan scenario, where no tax revenue is redistributed to the taxpayers, is compared to the situation where public expenditures are direct transfer payments. In-between, we investigate a situation where tax revenue is used to finance a public good that provides neither direct nor immediate monetary benefits to the taxpayers. We ran this experiment in three different countries, Canada, France, and Germany, to test whether there may exist any country differences in attitude toward taxation and redistribution. We find that effort is significantly higher in the redistribution treatment than the Leviathan treatment. Tax revenue is the highest in the redistribution treatment, followed by the global public good and the Leviathan treatment. On average, the effort is higher in France than in Canada and Germany.
    Keywords: Real-effort experiment,Taxation,Redistribution,Labor supply,Laffer curve
    JEL: D31 H23 H53
    Date: 2019
  4. By: Kakpo, Eliakim
    Abstract: This paper evaluates the incidence of a natural experiment entailed by the 2005 Ohio tax reform. The policy reduced the corporate and personal income taxes over the period 2006-2010. I observe several cross-sections of the Current Population Survey and compare individuals in Ohio to similar individuals in Pennsylvania. Using a triple difference identification approach, I conclude that the reform significantly boosted labor force participation for women, specifically those with 5-year-old children and increased reported self-employment taxable earnings. However, it does not seem to have had a positive impact on corporate wages in the short-run.
    Keywords: Tax incidence, Income tax, Corporate tax, Self-employment, Wages, Employment
    JEL: H20 H24 H25
    Date: 2018–08
  5. By: Kakpo, Eliakim
    Abstract: A recent set of empirical works highlights a puzzling asymmetric response of labor market outcomes to the corporate tax. This paper explores a potential source of this disparity, using differentials in profit accounting rules across U.S. states. I exploit policy discontinuities at state borders by pairing counties in states featuring a tax change with their contiguous counterparts in control states. I notice that corporate tax cuts do not boost employment while tax hikes reduce job creation. The incidence of tax increases on employment seems limited in states with a single sales factor apportionment formula and pronounced in states that use a triple factor apportionment rule. I present a basic conceptual framework that explains this pattern.
    Keywords: Keywords: Tax incidence, Profit-shifting, Corporate tax, Profit apportionment, Employment.
    JEL: H22 H25 H71
    Date: 2018–08
  6. By: Fedotenkov, Igor; Idrisov, Georgy
    Abstract: In this paper, we develop a supply-demand model for the public sector, measured as governments' tax revenues divided by GDP. We use a political equilibrium with a rule of majority. The model takes into account inefficiencies caused by taxes and includes costs associated with public goods provision to consumers. We show that the size of the public sector depends on the median voter's income, size of population, costs associated with taxpaying, and quality of institutions, which reflect costs of public goods provision. The estimates for the OECD countries (2000-2017), using dynamic panel model techniques, are in line with the theoretical predictions; however, they do not confirm Wagner's law. Our estimates suggest that the size of the government sector grows as income increases, but at a slower rate. We show that the quality of institutions matters: a more effective government raises the share of public sector; better regulations, which permit and promote private sector development, reduce it.
    Keywords: Size of public sector; tax burden; median voter; Wagner's law; political equilibrium
    JEL: D60 D72 H30 H41 I38 P16 P43 P48
    Date: 2019–07–09
  7. By: Nicola Comincioli (University of Brescia and Fondazione Eni Enrico Mattei); Sergio Vergalli (University of Brescia and Fondazione Eni Enrico Mattei); Paolo M. Panteghini (University of Brescia and CESifo)
    Abstract: In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax revenue).
    Keywords: Capital Structure, Default Risk, Business Taxation and Welfare
    JEL: H25 G33 G38
    Date: 2019–07
  8. By: Antoine Bozio (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Thomas Breda (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Julien Grenet (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.
    Keywords: Tax- Benefit Linkage,Social Security Contributions,Tax Incidence,Payroll Tax
    Date: 2019–07
  9. By: Jonas Teusch (OECD); Nils Axel Braathen (OECD)
    Abstract: This paper provides a concrete example of how policy analysts can use empirical programme evaluation studies to perform ex-post assessments of environmentally related tax policies. A number of studies credibly identify causal effects of environmentally related tax policies, but do not necessarily provide all the information needed to fully inform the policy-making process. This paper argues that cost-benefit analysis (CBA) could enrich ex-post assessments of environmentally related tax policies, given that CBA provides decision makers with a broader perspective of social costs and benefits and allows the identification of potential trade-offs among policy objectives.
    Keywords: Bonus/malus policies, Cost-benefit analysis, Environmental Taxes, Feebates, Quantitative Policy Evaluation, Vehicle Purchase Taxes
    JEL: D61 D62 H23 H31
    Date: 2019–08–12
  10. By: Sebastian Koehne; Dominik Sachs
    Abstract: We analyze Pareto-efficient tax deduction rules for work-related expenses (e.g. housekeeping services, child care or elderly care). Pareto efficiency dictates a tight rule for how the rate of deductibility should vary with income and expenditures. An immediate implication is a recipe for designing Pareto-improving tax reforms. We apply our theory to housekeeping services in the U.S.: Introducing deduction rules such that between 55% (low expenses) and 85% (high expenses) of housekeeping services can be marginally deducted from taxable income yields a Pareto improvement if combined with a slight increase in marginal tax rates. Nobody is made worse-off and tax revenue increases by 20 Dollars per capita.
    Keywords: optimal taxation, tax deduction, Pareto-improving tax reform
    Date: 2019
  11. By: Rodrigo Octávio Orair (IPC-IG); Sergio Wulff Gobetti (IPC-IG)
    Abstract: "The evaluation of a tax system?that is, the set of legal rules that governs the exercise of authoritative rule by various government entities in the form of tax collection in the country?is notoriously controversial in Brazil, as elsewhere. The tax system plays a central role in a modern economy, insofar as it affects a country's economic growth and competitiveness in various and complex ways, as well as its social and regional distribution of income. It is also a crucial way to determine how much of the costs each group of citizens and companies, and from which regions of the country, will have to shoulder to finance a given State type and size, and its provision of public services and goods". (...)
    Keywords: Tax, reform, Brazil, guiding, principles, proposals, debate
    Date: 2019–05

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