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on Public Finance |
| By: | Thomas Piketty; Emmanuel Saez |
| Abstract: | This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the US pattern. France had less progressive taxes than the US or UK in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the US or the UK. |
| JEL: | H2 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12404&r=pub |
| By: | Alan J. Auerbach |
| Abstract: | As a share of GDP, U.S. federal tax revenues from nonfinancial corporations have held relatively constant since the early 1980s, after falling precipitously during the late 1960s and the 1970s. But this relative constancy masks offsetting trends in the ratio of nonfinancial C corporation profits to GDP (declining) and the average tax rate on these profits (increasing). The average tax rate rose steadily between 1996 and 2003, an increase largely attributable to an unprecedented rise in the importance of tax losses. This rise casts some doubt on the importance of tax planning activities as a vehicle for reducing corporate taxes. So, too, does the relative stability of the rate of profit (relative to net assets), which might be expected to have declined had the understatement of profits for tax purposes been increasing. |
| JEL: | G32 H25 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12463&r=pub |
| By: | Stefania Albanesi |
| Abstract: | This paper studies optimal taxation of entrepreneurial capital and financial assets in economies with private information. Returns to entrepreneurial capital are risky and depend on entrepreneurs' hidden effort. It is shown that the idiosyncratic risk in capital returns implies that the intertemporal wedge on entrepreneurial capital that characterizes constrained-efficient allocations can be positive or negative. The properties of optimal marginal taxes on entrepreneurial capital depend on the sign of this wedge. If the wedge is positive, the optimal marginal capital tax is decreasing in capital returns, while the opposite is true when the wedge is negative. Optimal marginal taxes on other assets depend on their correlation with idiosyncratic capital returns. The optimal tax system equalizes after tax returns on all assets, thus reducing the variance of after tax returns on capital relative to other assets. If entrepreneurs are allowed to sell shares of their capital to outside investors, returns to externally owned capital are subject to double taxation- at the level of the entrepreneur and at the level of the outside investors. Even if entrepreneurs can purchase private insurance against their idiosyncratic risk, optimal asset taxes are essential to implement the constrained-efficient allocation if entrepreneurial portfolios are private information. |
| JEL: | D82 E22 E62 G18 H2 H21 H25 H3 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12419&r=pub |
| By: | Alan D. Viard |
| Abstract: | It is well known that pay-as-you-go retirement programs reduce steady-state welfare and the capital stock in dynamically efficient OLG economies. The common two-period OLG model obscures, however, the dependence of these effects on the ages at which taxes are paid and benefits are received. Program changes that shift taxes to older workers or benefits to younger retirees have effects similar to reductions in program size, yielding steady-state welfare gains and increases in capital accumulation while imposing transition costs on current generations. This analysis has policy implications for both tax and benefit timing.> |
| Keywords: | Social security ; Fiscal policy ; Taxation |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0602&r=pub |
| By: | Wolfgang Eggert (Department of Economics, University of Konstanz) |
| Abstract: | This paper analyzes the choice of taxes and international information exchange by governments in a capital tax competition model. We explain situations where countries can choose tax rates on tax savings income and exchange information about the domestic savings of foreigners, implying that the decentralized equilibrium is efficient. However, we also identify situations with adverse welfare properties in which information exchange is compatible with zero taxes on capital income. The model helps to identify the linkage between voluntary information exchange and the choice of tax rates. It is shown that the recent development in information exchange treaties may not be useful to overcome the inefficiencies caused by decentralized tax setting. |
| Keywords: | withholding tax, tax credit, international tax competition, information exchange |
| JEL: | H77 H87 F42 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:knz:cofedp:0306&r=pub |
| By: | Dirk Schindler (Department of Economics, University of Konstanz); Guttorm Schjelderup (Norwegian School of Economics and Business Administration an CESifo) |
| Abstract: | We study how harmonization of corporate tax systems affects the stability of international cartels. We show that tax base harmonization reinforces collusive agreements, while harmonization of corporate tax rates may destabilize or stabilize cartels. We also find that bilateral and full harmonization to a common standard is worse from society’s point of view than unilateral harmonization to a minimum tax standard. |
| Keywords: | Corporate tax systems, tacit collusion |
| JEL: | H87 L1 |
| Date: | 2006–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:knz:cofedp:0601&r=pub |
| By: | Adam Looney; Monica Singhal |
| Abstract: | We use anticipated changes in tax rates associated with changes in family composition to estimate intertemporal labor supply elasticities and elasticities of taxable income with respect to the net-of-tax wage rate. Changes in the ages of children can affect marginal tax rates through provisions of the tax code that are tied to child age and dependent status. We identify behavioral responses to these tax changes by comparing families who experienced a tax rate change to families who had a similar change in dependents but no resulting tax rate change. A primary advantage of our approach is that these changes can be anticipated, allowing us to estimate substitution effects that are not confounded by life-cycle income effects. We estimate an intertemporal elasticity of family labor earnings of 0.75 for families earning between $35,000 and $85,000 in the Survey of Income and Program Participation (SIPP) and find very similar estimates using the IRS-NBER individual tax panel. |
| JEL: | H2 H31 J22 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12417&r=pub |
| By: | Louis Kaplow |
| Abstract: | Myopia is increasingly believed to be a significant determinant of behavior and also plays a central role in justifications for social security and policies toward the taxation of capital. It is important, however, to account for labor supply effects, particularly in light of the preexisting distortion due to labor income taxation. For example, might even actuarially fair social security have the highly distortionary effect of a tax on top of an existing tax (the income tax) because myopic individuals give excessive weight to present levies on earnings that finance distant future benefits? Similarly, might greater reliance on capital rather than labor income taxation be attractive because collections are in the future rather than when earnings are received? To answer these and other questions, this article analyzes the effect of such policies on labor supply in a model that explicitly incorporates myopic decision-making. Many of the results may seem counterintuitive. In most respects, even with myopia, social security has qualitatively different effects than those of a tax levied on top of an existing tax. Both social security and capital taxation may cause labor supply to rise or fall when individuals are myopic, depending on the curvature of individuals’ utility as a function of consumption. Moreover, whatever is the sign of these effects under one assumption about how myopia relates to labor supply decisions, the sign is reversed under the other assumption that is considered. Additionally, some interventions have a first-order effect on labor supply from the outset but others do not, and some labor supply effects rise with the magnitude of the intervention whereas others fall. |
| JEL: | D11 D91 H21 H24 H55 J22 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12452&r=pub |
| By: | Iris Claus |
| Abstract: | This paper develops an open economy model to assess the long-run effects of taxation where firms are finance constrained. Finance constraints arise because of imperfect information between borrowers and lenders. Only borowers (firms) can costlessly observe actual returns from production. Imperfect information and finance constraints magnify the effects of taxation. A reduction (rise) in income taxation increases (lowers) firms' internal funds and their ability to assess external finance to expand production. The findings thus underline the importance of incorporating access to finance into models that assess the impact of taxation. |
| JEL: | H2 E44 F41 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:pas:camaaa:2006-20&r=pub |
| By: | Kolm, Ann-Sofie (Department of Economics, Copenhagen Business School); Larsen, Birthe (Department of Economics, Copenhagen Business School) |
| Abstract: | This paper provides an assessment of Greenland's tax system and contemplates changes that may be undertaken in the future to prepare for greater economic self-reliance and for the country's participation in the wider world economy. At the outskirts of Europe, Greenland is an autonomous part of the Danish kingdom, though currently not a member of EU. However, its cooperation with European countries and its dependency on international trade renders it necessary for the tax system in Greenland to be attuned to developments in the rest of the world. Drawing on a thorough international benchmarking analysis of Greenland's tax system, the paper's special focus will be on the corporate tax system and its interplay with personal taxation, as well on as the system of import duties. In particular, we carry out computations of effective marginal and average corporate tax rates, as well as average effective tax burdens on consumption, labour income and capital income, and compare these to similar measures for EU countries. In addition, we outline how Greenland's economic policy in other areas interferes with tax policy. Especially fishery regulation, management of government-owned companies, and housing policy have major implications for the tax system. |
| Keywords: | international benchmarking; effective tax rates; Greenland |
| JEL: | H26 I21 J64 |
| Date: | 2006–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2003_013&r=pub |