nep-pub New Economics Papers
on Public Finance
Issue of 2007‒01‒28
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Public Provision of Private Goods and Nondistortionary Marginal Tax Rates By Blomquist, Sören; Christiansen, Vidar
  2. Tax rates on energy usage By Nico van Leeuwen

  1. By: Blomquist, Sören (Department of Economics); Christiansen, Vidar (Department of Economics)
    Abstract: The incidence and efficiency losses of taxes have usually been analysed in isolation from public expenditures. This negligence of the expenditure side may imply a serious misperception of the effects of marginal tax rates. The reason is that part of the marginal tax may in fact be payment for publicly provided commodities and reflect a cost that the consumers should bear in order to face the right incentives. Hence, part of the marginal tax serves the same role as a market price in the sense that it conveys information about a real social marginal cost of working more hours. We develop this idea formally by studying an optimal income tax model in combination with a type of public provision scheme not analyzed before; the provision level is individualized and positively associated with the individuals’ labour supply. As examples we discuss day care, elderly care, primary education and health care. We show that there is a gain in efficiency if public provision of such a service replaces market purchases. We also show that it is necessary for efficiency that marginal income tax rates are higher than in economies where the services are purchased in the market. This is because the optimal tax should be designed so as to face the taxpayers with the real cost of providing the services. Hence, it might very well be that economies with higher marginal tax rates have less severe distortions than economies with lower marginal tax rates. We also explore whether an efficiency gain is achievable by alternatively making day care expenses tax deductible and derive a negative conclusion.
    Keywords: Marginal income tax; public provision; private goods; in-kind transfer; tax deductions
    JEL: H21 H42 I38
    Date: 2007–01–12
  2. By: Nico van Leeuwen
    Abstract: The tax rates of deliveries of energy products to industry and households in the GTAP-6 database are in some countries for the year 2001 rather different from the ones reported by the International Energy Agency (IEA). Especially the rates for deliveries to industry seem to be too high. This paper shows the rates derived from IEA with observations from Energy Prices and Taxes statistics and documents a new dataset with adjusted tax rates. Comparison with the GTAP-6 database reveals some striking differences. The rates are further adjusted for petroleum and coal products after comparing the implied taxes calculated as a percentage of GDP with the OECD Revenue Statistics. For other energy carriers we have not corrected the rates any further. <P> This paper is a contribution to the paper "The EU-ETS and existing energy taxes", which was delivered as a contribution to the EU TAXBEN-project (
    Keywords: energy usage; tax rates
    JEL: H20 H25
    Date: 2006–12

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