nep-pub New Economics Papers
on Public Finance
Issue of 2007‒02‒24
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Impact of Income Taxation on the Ratio between Reservation and Market Wages and the Incentives for Labour Supply By Marco Caliendo; Ludovica Gambaro; Peter Haan
  2. Taxation and Democracy in the EU By Ganghof, Steffen,; Philipp Genschel
  3. "The April AMT Shock: Tax Reform Advice for the New Majority" By Dimitri B. Papadimitriou; L. Randall Wray
  4. E-ZTax: Tax Salience and Tax Rates By Amy Finkelstein
  5. The Brazilian ’Tax War’: The Case of Value-Added Tax Competition Among the states By Luiz de Mello
  6. Simplicity of the Tax Systems: The Chilean Case. (in Spanish) By Barra, Patricio

  1. By: Marco Caliendo (DIW Berlin, IAB Nuremberg and IZA); Ludovica Gambaro (London School of Economics); Peter Haan (DIW Berlin and Free University Berlin)
    Abstract: This paper extends previous research about the determinants of reservation wages by analysing the effect of progressive income taxation on the ratio between reservation and net market wages. Based on micro data for Germany (SOEP) we show that joint income taxation in Germany which discriminates by marital status, has a strong and highly significant impact on the reservation/market wage ratio. Relative to single filers, this leads to strong negative labour supply incentives for secondary earners and to positive incentives for first earners in married couples.
    Keywords: reservation/ market wage ratio, income taxation, labour supply, microsimulation
    JEL: J22 H24 H31
    Date: 2007–02
  2. By: Ganghof, Steffen,; Philipp Genschel
    Abstract: Abstract Is corporate tax competition a threat to democracy in the EU? The answer dependscrucially on a positive analysis of the effects of tax competition on national policy autonomy.Most analyses focus on direct effects on corporate tax rates and revenues. Wecontend that this focus is too narrow. It overlooks the fact that corporate tax competitionalso has important indirect effects on the progressivity and revenue-raising potentialof personal income taxation. We elaborate on these indirect effects theoreticallyand empirically, and explore the implications for the normative debate on the EU'sdemocratic defi cit. Our fi ndings show that European integration can constrain nationalredistribution in a major way: the democratic defi cit is real. Greater political contestationover the EU's policy agenda is desirable in order to mitigate this defi cit.
    Keywords: tax policy; tax competition; democracy; harmonisation; harmonisation; normative political theory; majority voting; European Commission
    Date: 2007–02–13
  3. By: Dimitri B. Papadimitriou; L. Randall Wray
    Abstract: Anyone who reads a newspaper knows that most Americans have accumulated excessive levels of debt, and realizes that as interest rates climb, it becomes more difficult to service financial liabilities. To add insult to injury, wage growth has been slow, while pricesÑespecially for energyÑhave risen sharply. What is not clear, however, is the fact that taxes have also been rising rapidly, relative to both income and government spending. In this Policy Note, we concentrate on the last issue, and argue that many middle-income earners will find themselves unprepared for the coming surprise in April.
    Date: 2007–01
  4. By: Amy Finkelstein
    Abstract: This paper tests the hypothesis that the salience of a tax system affects equilibrium tax rates. To do this, I analyze how toll rates change after toll facilities adopt electronic toll collection. Unlike manual toll collection, in which the driver must hand over cash at the toll collection plaza, electronic toll collection automatically debits the toll amount as the car drives through the toll plaza, thereby plausibly decreasing the salience of the toll. I find robust evidence that toll rates increase following the adoption of electronic toll collection. My estimates suggest that, in steady state, toll rates are 20 to 40 percent higher than they would have been without electronic toll collection. Consistent with the hypothesis that decreased tax salience is responsible for the increase in toll rates, I also find evidence that the short run elasticity of driving with respect to the actual toll declines (in absolute value) following the adoption of electronic toll collection. I consider a variety of alternative explanations for these results and conclude that these are unlikely to be able to explain the findings.
    JEL: H11 H72 R48
    Date: 2007–02
  5. By: Luiz de Mello
    Abstract: This paper tests for horizontal tax competition in the VAT for a sample of Brazilian states in the period 1985-2001. The states have considerable autonomy to set their VAT rates and bases, often using this tax as an industrial policy tool. The empirical findings, based on the estimation of a tax reaction function in an error-correction set-up, confirm the hypothesis of horizontal tax competition: the states react strongly to changes in their neighbours? VAT code, especially those that belong to the same geo-economic region. Also, there appears to be a Stackelberg leader among the states, with the remaining jurisdictions responding strongly to its policy moves. There is no co-occupancy of tax bases between different levels of government and hence limited scope for vertical externalities in tax setting. But the fact that the federal government shares with the states part of the revenue of its more elastic taxes, such as the income tax, appears to affect the opportunity cost of horizontal tax competition. <P>La "guerre fiscale" au Brésil : La concurrence des états sur la taxe sur la valeur ajoutée <BR>Ce document présente une analyse empirique de la concurrence horizontale sur la taxe sur la valeur ajoutée (TVA) parmi les états du Brésil durant la période 1985-2001. Les états brésiliens ont une autonomie considérable en matière de politique fiscale pour établir le taux d’imposition et l’assiette de leur TVA. Ils se servent souvent de cet impôt comme instrument de politique industrielle. Les résultats de l’analyse empirique basée sur l’estimation d’une fonction de réaction fiscale avec un mécanisme de correction d’erreur confirme l’hypothèse de concurrence horizontale parmi les états: ils réagissent fortement aux changements des taux d’imposition de la TVA de leurs voisins, surtout ceux qui appartiennent à la même région géo-économique. Par ailleurs, il y a un leader Stackelberg parmi les états, puisque les autres administrations réagissent fortement à sa politique fiscale. Les différents niveaux d’administration ne partagent pas les mêmes assiettes de sorte que les externalités verticales associées à la politique fiscale sont assez limitée au Brésil. Néanmoins, le fait que l’administration fédérale partage avec les états une part importante des recettes de ses impôts plus élastiques, tel que l’impôt sur le revenu, affecte le coût d’opportunité de la concurrence horizontale parmi les états en terme de politique fiscale.
    JEL: H2 H7
    Date: 2007–02–14
  6. By: Barra, Patricio
    Abstract: The objective of this paper is to evaluate the concept of the simplicity in a tax system. The analysis approaches the different scopes in which the tax simplicity is observed. For this purpose, the main aspects of the Chilean tax system are analyzed, by using indicators that try to define the concept in a quantitative frame. The analysis of the Chilean case is used to infer some implications that could also be valid in other Latin American tax systems.
    Keywords: simplicidad tributaria; política tributaria; administración tributaria
    JEL: H20 H11
    Date: 2006–05–02

This nep-pub issue is ©2007 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.