nep-pub New Economics Papers
on Public Finance
Issue of 2008‒01‒26
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Effects of Taxes on Economic Behavior By Martin S. Feldstein
  2. Tax Rate Cuts and Tax Compliance--The Laffer Curve Revisited By Elöd Takáts; Tamas K. Papp

  1. By: Martin S. Feldstein
    Abstract: This paper discusses how the effects of taxes on economic behavior are important for revenue estimation, for calculating efficiency effects, and for understanding short-term macroeconomoic consequences. The primary focus is on taxes on labor income but some attention is given to taxes on income from saving. Specific calculations illustrate the importance of behavioral responses for accurate calculation of the revenue effects and deadweight losses of tax changes.
    JEL: H2
    Date: 2008–01
  2. By: Elöd Takáts; Tamas K. Papp
    Abstract: The paper shows how tax rate cuts can increase revenues by improving tax compliance. The intuition is that tax evasion has externalities: tax evaders protect each other, because they tie down limited enforcement capacity. Thus, relatively small tax rate cuts, which decrease incentives to evade taxes, can lead to increased revenues through spillovers - creating Laffer effects. Interestingly, tax rate cuts here imply increasing effective taxes. The model is consistent with what happened in Russia, and may provide basis for further thinking about tax rate cuts in other countries.
    Keywords: Tax evasion , Russian Federation , Tax revenues , Taxes ,
    Date: 2008–01–11
  3. By: Lari Arthur Viianto (Universidad de Alicante)
    Abstract: In the economic literature a constant tax rate on labor income has usually a neutral or negative effect on education. The effect is neutral in the absence of non-deductible costs and it is negative in the presence of them. A positive effect is obtained in the presence of non-deductible profits or uncertainty in the returns to education. In this model education is treated as a signalling device for the level of human capital and agents choose freely their labor supply under certainty and perfect financial markets. Within this framework a constant tax rate on labor income has a positive effect on education under certainty and in the absence of non-deductible costs or profits as long as consumption and leisure are complementary and the amount of transfers and family income is low enough.
    Keywords: Education, taxes.
    JEL: I20 H20 H24
    Date: 2007–12

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