nep-pub New Economics Papers
on Public Finance
Issue of 2006‒06‒24
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Choice Between Income and Consumption Taxes: A Primer By Alan J. Auerbach
  2. Who pays commodity taxes ? Evidence from French reforms, 1987-1999. By Clément Carbonnier
  3. Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany By Frank M. Fossen; Viktor Steiner
  4. Social Security's Financial Outlook: The 2006 Update In Perspective By Alicia H. Munnell

  1. By: Alan J. Auerbach
    Abstract: It has now been nearly three decades since the publication of two important volumes that laid out many of the details of how one might implement a progressive consumption tax (Institute for Fiscal Studies, 1978; U.S. Treasury, 1977). Over the years since, many contributions have analyzed the mechanics of the different variants of consumption taxation, the potential efficiency and distributional effects of their adoption, the issues of administration and transition from the current tax system, and the problems relating to certain types of transactions. But much of what we “know” is not part of the general policy discussion and there are important issues that the literature has recognized but still not resolved. The aim of this paper is to lay out the key economic issues involved in deciding whether and how to adopt a consumption tax and to discuss what theory and evidence have told us and could tell us about these issues.
    JEL: H20
    Date: 2006–06
  2. By: Clément Carbonnier
    Abstract: The point of this paper is to measure empirically the distribution of the commodity tax burden between consumers and producers. For that purpose, two French reforms are studied. These reforms are steep decreases of the VAT rate on housing repair services on the one hand, and on new car sales on the other hand, the last sector being far more concentrated. The consumer share of the commodity tax burden is 77% in the housing repair services market and 52% in the new car sales market. That confirms the theoretical result of the consumer share increasing with the competition level. This result may influence recommendations about differentiated commodity tax rates.
    Date: 2006
  3. By: Frank M. Fossen (DIW Berlin); Viktor Steiner (Free University of Berlin, DIW Berlin and IZA Bonn)
    Abstract: Entrepreneurial activity is often regarded as an engine for economic growth and job creation. Through tax policy, governments possess a potential lever to influence the decisions of economic agents to start and close small businesses. In Germany, the top marginal income tax rates were reduced exclusively for entrepreneurs in 1994 and 1999/2000. These tax reforms provided two naturally defined control groups that enable us to exploit the legislation changes as "natural experiments". First, the tax rate reductions did not apply to freelance professionals (Freiberufler), and second, entrepreneurs with earnings below a certain threshold were not affected. Using data from two different sources, the SOEP and the Mikrozensus (LFS), we analyse the effect of the tax cuts on transitions into and out of selfemployment and on the rate of self-employment. We apply a "difference-in-difference-indifference" estimation technique within a discrete time hazard rate model. The results indicate that the decrease in tax rates did not have a significant effect on the self-employment decision.
    Keywords: taxation, entrepreneurship, natural experiment, difference-in-difference-indifference estimation
    JEL: H24 H25 J23
    Date: 2006–06
  4. By: Alicia H. Munnell (Center for Retirement Research)
    Abstract: The Social Security Trustees have just issued their 2006 Report on the financial outlook for the system. The Report uses three sets of cost assumptions — high, low, and intermediate. This brief focuses on the intermediate assumptions and puts this year's numbers in perspective
    Keywords: Social Security, financial outlook, retirement
    Date: 2006–06–12

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