nep-pub New Economics Papers
on Public Finance
Issue of 2008‒03‒08
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Integrating Income Tax and National Insurance: an interim report By Stuart Adam; Glen Loutzenhiser
  2. Uncertainty and the Double Dividend Hypothesis By Eftichios Sartzetakis; Panagiotis D. Tsigaris

  1. By: Stuart Adam (Institute for Fiscal Studies); Glen Loutzenhiser
    Abstract: <p><p><p>Income Tax and National Insurance are now sufficiently similar that merging them appears to be a plausible option, yet still sufficiently different that integration raises significant difficulties. This paper surveys the potential benefits of integration - increased transparency and reduced administrative and compliance costs - and the potential obstacles, assessing the extent to which each of the differences between Income Tax and NICs - in particular the contributory principle, the levying of an employer charge and the differences in tax base - constitute serious barriers to integration. The paper concludes that few of the difficulties look individually prohibitive, but that trying too hard to avoid significant reform of the current policy framework could produce a merged tax so complicated as to nullify much or all of the benefits of integration.</p></p></p>
    Keywords: Taxation, social insurance, administration
    JEL: H24 H25 H83 K34
    Date: 2007–12
  2. By: Eftichios Sartzetakis (University of Macedonia); Panagiotis D. Tsigaris (Thompson Rivers University)
    Abstract: This paper examines the double dividend hypothesis in the presence of labour income uncertainty. Empirical evidence shows that uncertainty over labour income is particularly significant in developing, while not negligible in developed countries. Under uncertainty, and assuming incomplete capital markets, the tax system plays a role in providing social insurance and a green tax reform influences its effectiveness. We show that the increase in environmental tax reduces consumption risk while the balanced budget decrease in labour income tax increases income risk. We find that the total welfare effect of a green tax reform differs substantially from the case of certainty. The critical parameters determining the existence of a second dividend are the lump sum transfers, the relative substitutability of the two goods for leisure and the initial tax rates relative to their optimal that determine also the response of labour supply to a change in the tax mix.
    Keywords: Double Dividend Hypothesis, Environmental Taxation, Labor Income Taxation, Uncertainty, Tax Incidence Analysis
    JEL: H21 H23 D62
    Date: 2007–11

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