nep-pub New Economics Papers
on Public Finance
Issue of 2006‒01‒01
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How did the 2003 dividend tax cut affect stock prices and corporate payout policy? By Gene Amromin; Paul Harrison; Nellie Liang; Steve Sharpe
  2. Income Taxation and Household Size: Would French Family Splitting Make German Families Better Off? By Alexandre Baclet; Fabien Dell; Katharina Wrohlich
  3. Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect By Alessandro Balestrino
  4. Pensions for an Aging Population By Peter Diamond
  5. A Comment on the Role of Prices for Excludable Public Goods By Gilbert E. Metcalf; Jongsang Park

  1. By: Gene Amromin; Paul Harrison; Nellie Liang; Steve Sharpe
    Abstract: We examine the effects of the 2003 dividend tax cut on U.S. stock prices and corporate payout policies. First, using an event-study methodology, we compare the performance of U.S. stocks to that of other securities that should not have benefited from the tax change. We find that U.S. large-cap and small-cap indexes do not outperform their European counterparts, nor REIT stocks, over the event windows, suggesting little if any aggregate stock market effect from the tax change. In cross-sectional analysis, high-dividend stocks outperformed low-dividend stocks by a few percentage points over the event windows. On the other hand, non-dividend paying stocks are found to have outperformed the overall market by a small margin, but this result does not appear specific to the event windows, suggesting that non-tax factors were at play. Second, the tax change did appear to induce an increase in dividends, especially at firms where executive compensation was weighted more heavily toward stock than options. However, the effect on total payouts was more muted, as many firms scaled back share repurchases.
    Date: 2005
  2. By: Alexandre Baclet (INSEE Paris); Fabien Dell (PSE Paris and DIW Berlin); Katharina Wrohlich (DIW Berlin and IZA Bonn)
    Abstract: In this paper, we address the question whether family support via the income tax system is more generous in France than in Germany, as it is often claimed in the public debate. We use two micro-data sets and a micro-simulation model to compare effective average tax rates for different household types in France and Germany. Our analysis shows that the popular belief that French high income families with children face lower average tax rates than their German counterparts is true, however not due to the French Family splitting but rather to the different definitions of taxable incomes in both countries. Actually, low income families with less than three children even fare better in terms of tax relief in Germany than in France. The French system leads to lower average tax rates than the German one (over a large range of the income distribution) only for families with three children.
    Keywords: D31, H24, J18
    Date: 2005–12
  3. By: Alessandro Balestrino (University of Pisa)
    Abstract: We present a model of income tax avoidance with heterogenous agents, assuming the presence of a comparison income effect and of a psychic cost (disutility) of tax dodging. We analyse the policy preferences of the agents, and identify a median-voter political equilibrium. Paralleling previous results in the optimal taxation literature, we show that the comparison income effect calls for a high degree of progressivity of the income tax; additionally, we find that this tendence is strenghtened by the psychic cost of avoidance. We then investigate the source of the stigma attached to the act of avoidance and find that such stigma is motivated by the desire to make redistribution more effective, and that it is enhanced by the income comparison effect.
    Date: 2005–12
  4. By: Peter Diamond
    Abstract: After presenting the Gruber-Wise analysis showing a strong effect on retirement of implicit taxes from pension rules, it is shown that there is no effect of these implicit taxes on unemployment. This supports the argument for avoiding high implicit taxes on continued work. Also discussed are methods for adjusting benefits and taxes for increases in life expectancy, with particular attention to increasing "the retirement age." Calculations are presented showing the decreases in benefits for an increase in the normal retirement age in the US and the years of service for a full benefit in France.
    JEL: H55
    Date: 2005–12
  5. By: Gilbert E. Metcalf; Jongsang Park
    Abstract: Blomquist and Christensen (2005) argue that welfare is initially decreasing in the price of an excludable public good and that the case for a positive public good price is weak. We argue that this result follows from their particular characterization of the public good and that a more reasonable characterization overturns their result. Hence the policy case for a positive price on the public good is stronger than Blomquist and Christiansen suggest. We also provide a more flexible characterization of public goods that nests a wide variety of public goods models.
    Keywords: public goods; optimal second-best taxation
    Date: 2005

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