nep-pbe New Economics Papers
on Public Economics
Issue of 2020‒02‒24
ten papers chosen by
Thomas Andrén

  1. Dynamic Taxation By Stefanie Stantcheva
  2. A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach By Nirmala Devi Mohanadas
  3. Taxes and Economic Growth in OECD Countries: A Meta-Analysis By Nazila Alinaghi; W. Robert Reed
  4. Analysing Tax-Benefit Reforms in the Netherlands: Using Structural Models and Natural Experiments By de Boer, Henk-Wim; Jongen, Egbert L. W.
  5. Opening the Red Budget Box: Nonlinear Effects of a Tax Shock in the UK By V. Colombo
  6. Trust in Government Institutions and Tax Morale By Antonios M. Koumpias; Gabriel Leonardo; Jorge Martinez-Vazquez
  7. Universal Basic Income and Progressive Consumption Taxes By Juan Carlos Conesa; Bo Li; Qian Li
  8. Evaluating the Success of President Johnson's War on Poverty: Revisiting the Historical Record Using a Full-Income Poverty Measure By Burkhauser, Richard V.; Corinth, Kevin; Elwell, James; Larrimore, Jeff
  9. Cigarette Taxes and Smoking among Sexual Minority Adults By Carpenter, Christopher S.; Sansone, Dario
  10. Maintaining high employment in Norway By Urban Sila; Philip Hemmings

  1. By: Stefanie Stantcheva
    Abstract: This paper reviews recent advances in the study of dynamic taxation, considering three main approaches: the dynamic Mirrlees, the parametric Ramsey, and the sufficient statistics approaches. In the first approach, agents' heterogeneous abilities to earn income are private information and evolve stochastically over time. Dynamic taxes are not ex ante restricted and are set for redistribution and insurance considerations. Capital is taxed only in order to improve incentives to work. Human capital is optimally subsidized if it reduces post-tax inequality and risk on balance. The Ramsey approach specifies ex ante restricted tax instruments and adopts quantitative methods, which allows it to consider more complex and realistic economies. Capital taxes are optimal when age-dependent labor income taxes are not possible. The newer and tractable sufficient statistics approach derives robust tax formulas that depend on estimable elasticities and features of the income distributions. It simplifies the transitional dynamics thanks to a newly defined criterion, the “utility-based steady state approach” that prevents the government from exploiting sluggish responses in the short-run. Capital taxes are here based on the standard equity-efficiency trade-off.
    JEL: H2 H21 H23 H24 H25
    Date: 2020–01
  2. By: Nirmala Devi Mohanadas (Faculty of Business, Multimedia University, Malaysia. Author-2-Name: Abdullah Sallehhuddin Abdullah Salim Author-2-Workplace-Name: Student Affairs Division, Multimedia University, 63100 Cyberjaya, Selangor, Malaysia Author-3-Name: Suganthi Ramasamy Author-3-Workplace-Name: Student Affairs Division, Multimedia University, 63100 Cyberjaya, Selangor, Malaysia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective – Although corporate tax avoidance is a widely discussed topic in the literature, conflicts do emerge when it is analyzed through the context of primary corporate duty. Should companies, in managing their taxes, solely honor their obligation to increase shareholders' wealth or should they cater to the interests of all their stakeholders? Such conflicts are especially evident in the inconsistent empirical observations on how corporate tax avoidance relate to corporate social responsibility (CSR), which makes the dearth of theoretical analysis on this issue even more conspicuous. Taking into account the socio-political nature and human elements in corporate tax avoidance, theoretical analyses from social sciences' perspectives are becoming markedly crucial. Methodology/Technique – This paper critically reviews the extant literature for discussions on how corporate tax avoidance is influenced by the dissenting approaches towards primary corporate duty.Findings – By allowing an insight into how people act and the world they live in, these analyses form a constructive tool to rationalize and foretell managerial actions towards shareholders and stakeholders alike.Novelty – It focuses particularly on the theories that are widely used to lend supports for such approaches. These theories are the agency theory, stakeholder theory, and legitimacy theory. Type of Paper: Review
    Keywords: Corporate Tax Avoidance; Corporate Social Responsibility (CSR); Theoretical Analysis; Shareholder Approach; Stakeholder Approach; Agency Theory; Stakeholder Theory; Legitimacy Theory.
    JEL: G30 G32 G39
    Date: 2019–12–11
  3. By: Nazila Alinaghi; W. Robert Reed (University of Canterbury)
    Abstract: A major difficulty with synthesizing estimates on taxes and economic growth is that they measure different things. This follows because studies differ in the government budget constraints implied by their regression specifications. To address this problem, we use a taxonomy from Gemmell, Kneller, and Sanz (2009) that predicts the growth effects from various tax-spending-deficit combinations. We apply this taxonomy to 641 estimates from 42 studies of tax effects in OECD countries, categorizing them based on the tax-spending-deficit combinations implied by their regression specifications. We then apply meta-analysis to this sample of estimates to calculate the effect of the following, revenue-neutral tax policy: a onepercentage point decrease in distortionary taxes as part of a negative-growth fiscal policy, accompanied by a one-percentage point increase in non-distortionary taxes as part of a positivegrowth fiscal policy. Our headline result is that the associated 95% confidence interval implies an average increase in annual economic growth between 0.05 to 0.25 percent a year. This compares to an average annual growth rate of approximately 2.50 percent for the countries in our study. Another result from our analysis is that we find evidence of publication bias favoring negative estimates in the tax and growth literature. On the other hand, our results do not find any evidence to support the conventional wisdom that taxes on labor and capital are more distortionary than other types of taxes.
    Keywords: Meta-analysis, Taxes, Economic growth, OECD
    JEL: H2 H5 H6 O47 O50
    Date: 2020–01–01
  4. By: de Boer, Henk-Wim (CPB Netherlands Bureau for Economic Policy Analysis); Jongen, Egbert L. W. (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: We combine the strengths of structural models and natural experiments in the analysis of tax-benefit reforms in the Netherlands. First we estimate structural discrete-choice models for labour supply. Next we simulate key past reforms and compare the predictions of the structural model with the outcomes of quasi-experimental studies. The structural model predicts the treatment effects well. The structural model then allows us to conduct counterfactual policy analysis. Policies targeted at working mothers with young children generate the largest labour supply responses, but generate little additional government revenue. Introducing a at tax, basic income or joint taxation is not effective.
    Keywords: tax-benefit reform, natural experiments, structural models, Netherlands
    JEL: C25 C52 H31 J22
    Date: 2020–01
  5. By: V. Colombo
    Abstract: This paper studies the real effects of an exogenous UK tax change in recessions and expansions. The tax shock is identified via the measure proposed by Cloyne (2013). Combining local projection techniques (Jordà, 2005) with smooth transition regressions (Granger and Teräsvirta, 1994), tax policy shock is found to affect UK macroeconomic variables depending on the phase of the business cycle the economy is when tax shock occurs. An exogenous tax cut in recessions triggers a large, persistent, positive, and statistically significant reaction in output, consumption, investment, exports, imports, and government consumption. The results suggest that the output tax multiplier is positive and above one (in absolute value) in recessions but not in expansions. The size and the sign of responses of a number of macroeconomic variables are also found to be state-contingent.
    JEL: E32 E62 H20
    Date: 2020–02
  6. By: Antonios M. Koumpias (Department of Social Sciences, University of Michigan-Dearborn, USA); Gabriel Leonardo (International Center for Public Policy, Georgia State University, USA); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, USA)
    Abstract: What actions do governments around the world take that may affect individuals’ trust in the government that positively influence tax morale (or a positive attitude toward tax compliance)? This paper researches which are the most salient government institutions that breed individual trust and the extent to which this trust ends up increasing citizens’ tax morale. We use cross-country survey information from the World Values Survey and the Freedom House spanning 92 countries and six survey waves during the period 1981-2014. Conditional on the level of political rights and civil liberties, we confirm prior evidence that trust in government organizations positively influences tax morale. More importantly, our findings show that it is trust in output government organizations that implement and deliver public goods and services to the citizenry that has a significantly larger impact on tax morale as compared to citizens’ trust in input-side organizations, such as the legislative and the executive branches of the government that design policy. We also exploit periods of democratic transitions, when large variations in trust may be present, to assess the role of trust in government organizations for tax morale using a treatment effects model. Our results reveal a robust, positive impact of negative democratic transitions on tax morale.
    Date: 2020–02
  7. By: Juan Carlos Conesa; Bo Li; Qian Li
    Abstract: We provide a comprehensive quantitative evaluation of Universal Basic Income (UBI), evaluating different degrees of generosity and the fiscal alternatives to finance it. Replacing existing targeted transfers with a UBI of equal fiscal cost results in widespred welfare losses. In contrast, a combination of generous UBI (at least $15,000 per household) with a switch to progressive consumption taxation could be beneficial from the perspective of ex-ante expected welfare in the long run. However, the quantitative analysis of the transitional dynamics reveals non-trivial transitional costs for most current households.
    Date: 2020
  8. By: Burkhauser, Richard V. (Cornell University); Corinth, Kevin (Council of Economic Advisers); Elwell, James (Joint Committee on Taxation); Larrimore, Jeff (Cornell University)
    Abstract: We evaluate progress in President's Johnson's War on Poverty. We do so relative to the scientifically arbitrary but policy relevant 20 percent baseline poverty rate he established for 1963. No existing poverty measure fully captures poverty reductions based on the standard that President Johnson set. To fill this gap, we develop a Full-income Poverty Measure with thresholds set to match the 1963 Official Poverty Rate. We include cash income, taxes, and major in-kind transfers and update poverty thresholds for inflation annually. While the Official Poverty Rate fell from 19.5 percent in 1963 to 12.3 percent in 2017, our Full-income Poverty Rate based on President Johnson's standards fell from 19.5 percent to 2.3 percent over that period. Today, almost all Americans have income above the inflation-adjusted thresholds established in the 1960s.
    Keywords: poverty in the united states, income measurement, in-kind transfers, tax credits
    JEL: D31 H24 I32 J3
    Date: 2019–12
  9. By: Carpenter, Christopher S. (Vanderbilt University); Sansone, Dario (Georgetown University)
    Abstract: We provide the first quasi-experimental evidence on the relationship between cigarette taxes and sexual minority adult smoking by studying individuals in same-sex households (a large share of whom are in same-sex romantic relationships) from the 1996-2018 Behavioral Risk Factor Surveillance System. We find that cigarette taxes significantly reduced smoking among men and women in same-sex households, and the effects we find for men in same-sex households are significantly larger than the associated effects for men in different-sex households (the vast majority of whom are heterosexual married/partnered men). This result suggests that the sizable disparities in adult smoking rates between heterosexual and sexual minority men would have been even larger in the absence of stricter tobacco control policy. In line with previous research indicating that cigarette taxes have 'lost their bite', we find no significant relationship between cigarette taxes and sexual minority smoking in more recent years.
    Keywords: LGBT, cigarette tax, health disparities
    JEL: H20 H71 I12 I18
    Date: 2020–01
  10. By: Urban Sila; Philip Hemmings
    Abstract: Norway has a well-functioning labour market with high employment and a compressed wage distribution, contributing to low inequality. Norway nevertheless faces challenges from a trend decline in employment rates among the young and prime-age men. Furthermore, immigrants and people with disabilities have significantly poorer labour market outcomes than rest of the population. Norway still faces comparatively high sick-leave absence and the share of the working-age population on disability support remains large. Relatively high school dropout rates are also of concern, in particular as opportunities for workers with low educational attainment are limited in the Norwegian labour market. This paper first describes the labour market and identifies its main strengths and weaknesses and then goes on to discussing policy areas to boost employment and ensure quality jobs for the future. These include reforms to i) sick-leave compensation and disability support, ii) early retirement incentives in old-age pensions; iii) education and skills; and, iv) integration of immigrants.
    Keywords: ageing, disability, education, employment, immigrants, integration, labour market, Norway, pensions, retirement, sick leave, skills
    JEL: H53 H55 I2 J2 J3 J6
    Date: 2020–02–10

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