nep-pub New Economics Papers
on Public Finance
Issue of 2006‒09‒16
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimum Commodity Taxation in Pooling Equilibri By Eytan Sheshinski
  2. Excise Taxation and Product Quality: The Gasoline Market By Todd M. Nesbit
  3. Pareto-Improving Bequest Taxation By Volker Grossmann; Panu Poutvaara
  4. TComparing Tax Rates Using OECD and GTAP6 Data By Gurgel, Angelo; Metcalf, Gilbert; Reilly, John

  1. By: Eytan Sheshinski
    Date: 2006–09–11
  2. By: Todd M. Nesbit (Department of Economics, West Virginia University)
    Abstract: Following Barzel (1976), product quality increases in response to unit taxation but remains unchanged by ad valorem taxation. While many tax theorists agree this argument is theoretically sound, empirical support of Barzel’s theory is limited to the cigarette market. This paper tests and confirms his theory in the gasoline market, a market in which Barzel failed to find supporting evidence in his original article. Using a direct test proposed by Sobel and Garrett (1997) and improved data, I find the market shares of premium and mid-grade gasoline rise in response to per-unit taxation but are unaffected by ad valorem taxation.
    Date: 2005
  3. By: Volker Grossmann (University of Fribourg, CESifo and IZA Bonn); Panu Poutvaara (University of Helsinki, CESifo and IZA Bonn)
    Abstract: Altruistic parents may transfer resources to their offspring by providing education, and by leaving bequests. We show that in the presence of wage taxation, a small bequest tax may improve efficiency in an overlapping-generations framework with only intended bequests, by enhancing incentives of parents to invest in their children’s education. This result holds even if the wage tax rate is held constant when introducing bequest taxation. We also calculate an optimal mix of wage and bequest taxes with alternative parameter combinations. In all cases, the optimal wage tax rate is clearly higher than the optimal bequest tax rate, but the latter is generally positive when the required government revenue in the economy is sufficiently high.
    Keywords: bequest taxation, bequests, education, Pareto improvement
    JEL: H21 H31 D64 I21
    Date: 2006–08
  4. By: Gurgel, Angelo; Metcalf, Gilbert; Reilly, John
    Abstract: In prior research, Babiker, Metcalf, and Reilly (2003) computed capital and labor tax rates to augment GTAP 4 data that did not comprehensively cover taxes. Recently, we updated these tax rates to 2001 to match the GTAP 6 base year. We realize there was an attempt to improve representation of taxes in GTAP 6, but as admitted by GTAP this was as yet incomplete. For those who might require a more complete tax accounting we have followed an approach that has the benefit of, at least in the aggregate, reconciliation with widely available tax receipt data. This note compares the tax rates derived for the OECD countries using this approach to those provided by the method GTAP uses. Those who are interested in economic impacts of fiscal measures--such as assuring revenue neutrality by raising tax rates in the face of a policy that reduces economic activity--may want to consider amending the tax data in GTAP. Alternatively, it may be useful to discuss the differences we note to as part of on-going efforts to improve data reported in GTAP. Table 1 provides tax rates based on our methodology as well as from GTAP 6, aggregated to be approximately comparable. More disaggregated GTAP 6 tax rates are provided in Tables 2-3. GTAP6 reports taxes on factor income (rTF) as well as income taxes (rTO) whereas BMR combine income and factor taxes into a composite factor tax. We construct an accumulated factor tax (ACC) from the GTAP6 tax data which we believe is directly comparable to the BMR tax rates by the formula: ACC = 1 - (1 - rTO)(1 - rTF)
    Date: 2006

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