nep-pbe New Economics Papers
on Public Economics
Issue of 2020‒01‒27
twelve papers chosen by
Thomas Andrén

  1. Capital Income Taxation with Housing By Makoto Nakajima
  2. Should the Law Do Anything about Economic Inequality By Dimick, Matthew; Library, Cornell
  3. Pension financing and individual retirement account By Arno Baurin; Jean Hindriks
  4. Optimal fiscal policy without commitment: Beyond Lucas-Stokey By Davide Debortoli; Ricardo Nunes; Pierre Yared
  5. The Impact of Profit Shifting on Economic Activity and Tax Competition By Alexander D Klemm; Li Liu
  6. Asset portfolio retirement decisions: the role of the tax and transfer system By Whelan, Stephen; Atalay, Kadir; Hayward, Richard Donald
  7. Hotels and Restaurant Tax Revenues Management By Tinri, M. Darwis Nur; Jamali, Hisnol
  8. Media Bias and Tax Compliance: Experimental Evidence By Miloš Fišar; Tommaso Reggiani; Fabio Sabatini; Jiří Špalek
  9. The Tax Structure of an Economy in Crisis: Greece 2009-2017 By Chrysa Leventi; Fidel Picos
  10. Pathways to housing tax reform By eccleston, richard; Verdouw, Julia; Flanagan, Kathleen; Warren, Neil; Duncan, Alan; Ong, Rachel; Whelan, Stephen; Atalay, Kadir; Hayward, Richard Donald
  11. Norms, Enforcement, and Tax Evasion By Anders Jensen
  12. Framed Payslips and People's Reactions to Labor Tax Changes By Ghesla, Claus; Sonntag, Axel

  1. By: Makoto Nakajima
    Abstract: This paper quantitatively investigates capital income taxation in the general-equilibrium overlap-ping generations model with household heterogeneity and housing. Housing tax policy is found to affect how capital income should be taxed, due to substitution between housing and non-housing capital. Given the existing U.S. preferential tax treatment for owner-occupied housing, the optimal capital income tax rate is close to zero (1%), contrary to the high optimal capital income tax rate found with overlapping generations models without housing. A low capital income tax rate improves welfare by narrowing a tax wedge between housing and non-housing capital; the narrowed tax wedge indirectly nullifies the subsidies (taxes) for homeowners (renters) and corrects over-investment to housing. Naturally, when the preferential tax treatment for owner-occupied housing is eliminated, a high capital income tax rate improves welfare as in the model without housing.
    Keywords: Incomplete Markets; Capital Income Taxation; Heterogeneous Agents; Overlapping Generations; Housing; Life Cycle; Optimal Taxation
    JEL: E21 H21 H24 R21
    Date: 2020–01–07
  2. By: Dimick, Matthew; Library, Cornell
    Abstract: Cornell Journal of Law and Public Policy: Vol. 26 : Iss. 1 , Article 1 What should be done about rising income and wealth inequality? Should the design and adoption of legal rules take into account their effects on the distribution of income and wealth? Or should the tax-and transfer system be the exclusive means to address concerns about inequality? A widely-held view argues for the latter: only the tax system, and not the legal system, should be used to redistribute income. While this proposition comes in a variety of normative arguments and has support across the political spectrum, there is also a well-known law-and economics version. This argument, known as the “double-distortion” argument, is simply stated. Legal rules that redistribute income only add to the economic distortions that are already present in the tax system. It would therefore be better for everyone, and especially the poor, to instead adopt an efficient, nonredistributive legal rule, and increase redistribution through the tax system. This Article challenges the double-distortion argument from a law and-economics perspective. There are two main arguments, in addition to several other subsidiary points. First, in the abstract, there is no reason to believe that legal rules that have redistributive effects will always reduce efficiency; indeed, they can sometimes increase efficiency. Examples from the regulation of product markets, labor markets, and financial markets underscore this claim. In these cases, legal redistribution is more efficient than redistribution through the tax system. Second, legal rules are likely to be more attractive than taxation precisely in cases where inequality itself or normative concern about inequality is high. Under the optimal tax policy, higher inequality or greater concern about inequality will justify larger tax distortions. Therefore, a particular legal rule is more likely to be more efficient than the optimal tax policy under these circumstances. The ultimate conclusion is that a mix of legal rules and taxation, rather than taxation exclusively, will be the best way to address economic inequality.
    Date: 2018–03–19
  3. By: Arno Baurin (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Jean Hindriks (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: In this article, we analyze the Belgium pension financing in retrospect for the period 1995-2017 and then we provide a prospective analysis based on the demographic and economic projections of the Federal Plan Bureau. In the retrospective part, we point out the growing importance of alternative financing relative to the social security contributions. The decomposition of the public pension growth over the last decade between the average pension and the number of retirees shows that three quarters of the growth is due to the increase of the average pension. In the prospective part, we simulate the contributions and pension benefits required to balance the budget, based on different rules: Defined Contribution, Defined Benefit and the Musgrave rule (keeping constant the ratio of pension benefit to wage net of contributions). We then simulate pension adjustment via the "individual retirement account" (IRA) as proposed in Devolder (2019) and Devolder & Hindriks 2019). Under the IRA, the adjustment variables are the accrual rate (which determines the new pension claims) and the indexation rate (which determines the past pension claims). Combining those adjustment variables, our simulations show that it is possible to protect past pension claims and ensure budget balance on a yearly basis. We propose a rule of adjustment so as to equate, year by year, the replacement rate across retirees of different ages.
    Keywords: social security, pension, retirement, ageing
    JEL: H55 J11 J14 J26
    Date: 2020–01–09
  4. By: Davide Debortoli; Ricardo Nunes; Pierre Yared
    Keywords: Public debt, optimal taxation, fiscal policy
    JEL: H63 H21 E62
    Date: 2019–02
  5. By: Alexander D Klemm; Li Liu
    Abstract: A growing empirical literature has documented significant profit shifting activities by multinationals. This paper looks at the impact of such profit shifting on real activity and tax competition. Real activity can be affected as profit shifting changes—and theoretically most likely reduces—the cost of capital. Tax competition, even over real capital, is affected, because a permissive attitude toward profit shifting can be seen as a selective tax reduction for multinationals. Tightening profit shifting rules in turn can affect tax competition through the main rate. This paper discusses these issues theoretically and with the help of a simulation to assess the impact of profit-shifting on investment, revenues, and government behavior. Using the theoretical framework, it also provides a brief overview of the related empirical literature.
    Date: 2019–12–20
  6. By: Whelan, Stephen; Atalay, Kadir; Hayward, Richard Donald (Australian Housing and Urban Research Institute (AHURI))
    Abstract: This study examined how Australia’s tax and transfer system, especially in relation to the Age Pension, impacts on household retirement choices. As the population ages, fiscal challenges created when many individuals retire from working and paying tax to drawing government funded benefits and services present some stark policy choices. Understanding how retirement decisions are shaped by the tax and transfer system is essential to developing a system that allocates resources efficiently across the economy, is consistent with principles of equity and is sustainable. Any such tax system is likely to have important implications for housing choices and housing markets.
    Date: 2018–05–09
  7. By: Tinri, M. Darwis Nur; Jamali, Hisnol
    Abstract: These researched to discuss about accountability of management administrative of hotel and restaurant taxes revenue in Makassar City. The problem of research were how the revenue of hotel and restaurant taxes, how the accountability of administrative on local revenue offices and how the management of hotel and restaurant taxes revenue. These researched aims to description of revenue of hotel and restaurant taxes, analyzed the accountability of administrative on local revenue offices and to explain the management of hotel and restaurant taxes revenue. The result of researched to founded that the revenue of hotel and restaurant taxes in annual the realization to be increased , but the realization it still less contribution for local income . These meaning that still there subject/object of hotel and restaurant taxes which not payment, not registration and to be passive taxes in local revenue offices. The attempt of improved the administration of hotel and restaurant taxes with applied accountability of administration through MITRA function and 5C approaches to implementation of administration activity which trust and accountable in management of hotel and restaurant taxes in local revenue offices. The management of hotel and restaurant taxes revenue have applied suitable with management function with “Mix Accountability of Administration Model" as the solution in administration of hotel and restaurant taxes which have trust and accountable to increased the realization of tax revenue and contribution toward regional income of Makassar City
    Date: 2018–05–20
  8. By: Miloš Fišar (Vienna University of Economics and Business & Masaryk University); Tommaso Reggiani (Cardiff University, Masaryk University & IZA); Fabio Sabatini (Sapienza University of Rome & IZA); Jiří Špalek (Masaryk University)
    Abstract: We study the impact of media bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are significantly more compliant than the control group. The exposure to negative news, instead, does not prompt any significant reaction in respect to the neutral condition, suggesting that participants perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news act as a constant source of psychological priming and play a vital role in taxpayers' compliance decisions.
    Keywords: Tax compliance, media bias, taxation game, laboratory experiment.
    JEL: C91 D70 H26 H31
    Date: 2020–01–23
  9. By: Chrysa Leventi (Greek Council of Economic Advisors); Fidel Picos (European Commission - JRC)
    Abstract: The 2010 Economic Adjustment Programme initiated a period of strict international supervision with respect to tax policy in Greece. The country implemented a large-scale fiscal consolidation package, aiming to reduce its public deficit below 3% of GDP by 2016. Since the beginning of the crisis, the provisions of the ‘Greek Programme’ have been revised several times, and personal income tax reform has figured prominently on almost each of the revision agendas. This paper aims to provide an assessment of the effects of the four major structural reforms that took place in Greece during and in the aftermath of the economic crisis; using microsimulation techniques, we simulate the (ceteris paribus) first-order impact of these reforms on the distribution of incomes, the state budget and work incentives, while also trying to identify the main gainers and losers of these policy changes. Our results suggest that all reforms had a revenue-increasing rationale, with the one of 2011 being designed to have the largest fiscal gains. The latter also strengthened redistribution and achieved the highest decrease in income inequality. The 2013 reform went to the opposite direction by reducing both the redistributive strength and the progressive nature of the Greek tax system. The striking discrepancies in the ways in which different household categories have been affected by the four reforms call for a deeper investigation of the possibility of moving towards more uniform personal income tax rules.
    Keywords: EUROMOD, personal income tax, reform, Greece, redistribution, work incentives
    JEL: H24 H23 I32
    Date: 2019–12
  10. By: eccleston, richard; Verdouw, Julia; Flanagan, Kathleen; Warren, Neil; Duncan, Alan; Ong, Rachel; Whelan, Stephen; Atalay, Kadir; Hayward, Richard Donald (Australian Housing and Urban Research Institute (AHURI))
    Abstract: This research is the final report of the AHURI Inquiry into ‘Pathways to Housing Tax Reform in Australia’. It features real-world modelling and implementation time frames to steer tax settings that progress the efficiency, equity and sustainability of housing tax policy, and also presents meaningful long-term political pathways to achieve these outcomes.
    Date: 2018–07–04
  11. By: Anders Jensen
    Abstract: This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK, which led to widespread evasion. The evidence is consistent with the model’s main predictions on the dynamics of evasion.
    Keywords: Tax Evasion
    Date: 2019–09
  12. By: Ghesla, Claus; Sonntag, Axel
    Abstract: Payslips are supposed to notify employees about wage-related information, enabling them to adjust their labor supply, when appropriate. However, payslips are often information-laden and complex to understand, casting doubt on whether they are adequately up to the task, potentially resulting in inefficient labor supply reactions. In a real-effort laboratory experiment we use a variety of information frames to potentially support a better understanding of wage related information. We find that participants strongly react to changes of incidental wage costs, yet the framing of payslips has no additional effect on people's labor supply. Nevertheless, including simple graphics increases comprehension and readability.
    Keywords: framing; labor taxes; incidental wage costs; experiment
    JEL: C91 H29 J22
    Date: 2019–12

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