nep-pub New Economics Papers
on Public Finance
Issue of 2005‒07‒25
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimum Income Taxation and Layoff Taxes By Pierre Cahuc; André Zylberberg
  2. Optimal Commodity Taxation When Land and Structures Must Be Taxed at the Same Rate By Saku Aura; Thomas Davidoff
  3. Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics By Martin Hellwig
  4. Second-Best Pollution Taxation and Environmental Quality By Thomas Gaube

  1. By: Pierre Cahuc (CREST-INSEE, University of Paris 1, CEPR and IZA Bonn); André Zylberberg (EUREQua, University of Paris 1 and CNRS)
    Abstract: This paper analyzes optimum income taxation in a model with endogenous job destruction that gives rise to unemployment. It is shown that optimal tax schemes comprise both payroll and layoff taxes when the state provides public unemployment insurance and aims at redistributing income. The optimal layoff tax is equal to the social cost of job destruction, which amounts to the discounted value of the sum of unemployment benefits (that the state pays to unemployed workers) and payroll taxes (that the state does not get when workers are unemployed). Our quantitative analysis suggests that the introduction of layoff taxes, that are usually absent from actual tax schemes, could lead to significant increases in employment and GDP.
    Keywords: layoff taxes, optimal taxation, job destruction
    JEL: H21 H32 J38 J65
    Date: 2005–07
  2. By: Saku Aura (Department of Economics, University of Missouri-Columbia); Thomas Davidoff
    Abstract: We show that the optimal property tax rate rises with the ratio of land rents to structure and land development costs. California’s high ratio of income to property tax revenue and the distribution of Federal housing subsidies thus appear geographically misplaced. Proportional taxation of non-housing commodities is not optimal, even when elasticities with respect to wages are identical. Absent externalities, the desirability of transportation taxes and“anti-sprawl” growth controls hinge on the relative importance of time versus money in commuting costs.
    Keywords: Property Taxes, Henry George Theorem
    JEL: H21 R13
    Date: 2005–07–19
  3. By: Martin Hellwig (Max Planck Institute for Research on Collective Goods, Bonn, Germany)
    Abstract: The paper develops an integrated model of optimal nonlinear income taxation, public-goods provision and pricing in a large economy. With asymmetric information about labour productivities and publicgoods preferences, the multidimensional mechanism design problem becomes tractable by requiring renegotiation proofness of the final allocation of private goods and admission tickets for excludable public goods. Under an affiliation assumption on the underlying distribution, optimal income taxation, public-goods provision and admission fees have the same qualitative properties as in unidimensional models. These properties are obtained for utilitarian welfare maximization and for a Ramsey-Boiteux formulation with interim participation constraints.
    Keywords: Optimal Income Taxation, Public Goods, Public-Sector Pricing, Multidimensional Mechanism Design, Ramsey-Boiteux Pricing
    JEL: D82 H20 H40
    Date: 2004–11
  4. By: Thomas Gaube (Max Planck Institute for Research on Collective Goods, Bonn, Germany)
    Abstract: This paper deals with second-best pollution taxation by investigating allocations instead of the corresponding tax rates. Assuming certain restrictions on utility and that the marginal revenue from environmental taxation is positive, it is shown that environmental quality is higher in second best where only distortionary taxes are used to finance public expenditures than in the first-best optimum where lump-sum taxes are available.
    Keywords: environmental taxation, public goods
    JEL: H21 H41
    Date: 2005–04

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