nep-pub New Economics Papers
on Public Finance
Issue of 2005‒07‒03
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax Competition and Public Input By Agnès Benassy-Quere; Nicolas Gobalraja; Alain Trannoy
  2. Private Provision of Public Goods : Incentives for Donations By Karen Pittel; Dirk T.G. Rübbelke
  3. The Efforts of Taxes on Market and Resources to Dividend Announcements and Payments: What Can We Learn from the 2003 Dividend Tax Cut? By Raj Chetty; Joseph Rosenberg; Emmanuel Saez
  4. Taxation and the Evolution of Aggregate Corporate Ownership Concentration By Mihir A. Desai; Dhammika Dharmapala; Winnie Fung

  1. By: Agnès Benassy-Quere; Nicolas Gobalraja; Alain Trannoy
    Abstract: We study the extent and policy implications of tax competition in the case of a double-competition on both tax rates and provision of public factors. First, we derive the relevant theoretical results in a unified framework where a corporate tax is used to finance a public good which both raises household utility and firm productivity. Then, the relevance of such double competition is tested with FDI data from the United States to the EU. We find ground for the coexistence of high tax/spending countries and low tax/spending ones. International competition could then act as a vector for rising public sector efficiency rather than a standardisation factor.
    Keywords: Tax competition; public factors; public goods; FDI; tax and budget policy
    JEL: F21 F23 H25 H41 H54
    Date: 2005–06
  2. By: Karen Pittel (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH)); Dirk T.G. Rübbelke (Department of Economics, Chemnitz University of Technology)
    Abstract: In many countries the government supports individuals' and companies' donations dedicated to charity organizations or { more general { to public goods. Yet the effects of governmental support with respect to the provision of public goods has been and still is subject to an extensive debate in the economic literature. Starting from Warr's (1982, 1983) famous neutrality result an array of conditions has been identified under which this result holds or not. In this paper we examine the commonly used policy approach to subsi- dize the private provision of public goods by granting agents deductions with respect to their income or corporate tax burden. We especially take into ac- count that most income tax schemes are progressive and that deductibility is limited. The problems that arise from these specific properties of the con- sidered tax-refund schemes are pointed out first. We then turn towards the effects which such a tax-refund scheme has with respect to the provision of the public good on the one hand and individual as well as aggregate wel- fare on the other hand. We show that the effects of this commonly practised method of supporting private public good provision depend crucially on the specific properties of the progressive tax scheme and the preference structure of agents. While Pareto-improvements and even Pareto-efficiency can result from the implementation of such a scheme, it is also conceivable that at least some agents perceive a utility reduction. Due to the dependency of welfare effects on the tariff structure, income tax reforms as they are planned in many countries might not only induce a reduction in private public good provision, but might also alter the induced welfare effects.
    Keywords: public goods, sponsoring, neutrality
    JEL: H23 H42
    Date: 2004–08
  3. By: Raj Chetty; Joseph Rosenberg; Emmanuel Saez
    Abstract: This paper investigates the effects of capital gains and dividend taxes on excess returns around announcements of dividend increases and ex-dividend days for U.S. corporations. Consistent with standard no-arbitrage conditions, we find that the ex-dividend day premium increased from 2002 to 2004 when the dividend tax rate was cut. Consistent with the signalling theory of dividends, we also find that the excess return for dividend increase announcements went down from 2002 to 2004. However, these findings are very sensitive to the years chosen for the pre-reform control period. Semi-parametric graphical analysis using data since 1962 shows that the relationship between tax rates and ex-day and announcement day premia is very fragile and sensitive to sample period choices. Strong year-to-year fluctuations in the ex-day and announcement day premia greatly reduce statistical power, making it impossible to credibly detect responses even around large tax reforms. The important non-tax factors affecting these premia must therefore be understood before progress can be made in evaluating the role of taxation in market responses.
    JEL: G1 H3
    Date: 2005–07
  4. By: Mihir A. Desai; Dhammika Dharmapala; Winnie Fung
    Abstract: Legal rules, politics and behavioral factors have all been emphasized as explanatory factors in analyses of the determinants of the concentration of corporate ownership and stock market participation. An extension of standard tax clientele arguments demonstrates that changes in the progressivity of taxes can also significantly influence patterns of equity ownership. A novel index of the concentration of corporate ownership over the twentieth century in the U.S. provides the opportunity to quantitatively test for the role of taxes in shaping ownership concentration. The index of ownership concentration is characterized by considerable time series variation, with significant diffusion of ownership in the post WWII era and reconcentration in the late 1990s. Analysis of this index indicates that the progressivity of taxation significantly influences corporate ownership concentration and equity market participation as predicted by the model. This evidence supports the intuition of Berle and Means (1932) that taxation can significantly influence patterns of equity ownership.
    JEL: G30 H24
    Date: 2005–07

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