nep-pub New Economics Papers
on Public Finance
Issue of 2008‒07‒14
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxation and Economic Growth By Åsa Johansson; Chistopher Heady; Jens Arnold; Bert Brys; Laura Vartia
  2. Taxes and Benefits: Two Distinct Options to Cheat on the State? By Halla, Martin; Schneider, Friedrich
  3. The impact of demographic uncertainty on public finances in the Netherlands By Alex Armstrong; Nick Draper; Ed Westerhout
  4. A Comparison of Debt and Primary-deficit Constraints By Beetsma, Roel; Ribeiro, Marcos Poplawski; Schabert, Andreas

  1. By: Åsa Johansson; Chistopher Heady; Jens Arnold; Bert Brys; Laura Vartia
    Abstract: This paper investigates the design of tax structures to promote economic growth. It suggests a “tax and growth” ranking of taxes, confirming results from earlier literature but providing a more detailed disaggregation of taxes. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes. Recurrent taxes on immovable property appear to have the least impact. A revenue neutral growth-oriented tax reform would, therefore, be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption. The paper breaks new ground by using data on industrial sectors and individual firms to show how re-designing taxation within each of the broad tax categories could in some cases ensure sizeable efficiency gains. For example, reduced rates of corporate tax for small firms do not seem to enhance growth, and high top marginal rates of personal income tax can reduce productivity growth by reducing entrepreneurial activity. While the paper focuses on how taxes affect growth, it recognises that practical tax reform requires a balance between the aims of efficiency, equity, simplicity and revenue raising. <P>Fiscalité et croissance économique <BR>Ce document examine la meilleure élaboration du système fiscal afin de promouvoir la croissance économique. Il suggère une classification des impôts selon le modèle « fiscalité et croissance », venant étayer des résultats déjà connus dans des publications antérieures, mais proposant une ventilation plus détaillée des différents impôts. Il s’avère que les impôts sur les sociétés grèvent le plus la croissance, suivis par les impôts sur le revenu des personnes physiques, et ensuite les impôts sur la consommation. Les impôts sur l’immobilier semblent les moins nocifs. Une réforme fiscale sans incidence sur les impôts et orientée sur la croissance consisterait à transférer une partie de la base imposable des impôts sur le revenu sur des impôts moins générateurs de distorsion, comme les impôts récurrents sur l’immobilier ou ceux sur la consommation. Ce document est innovant dans la mesure où il utilise des données sur les secteurs industriels et les sociétés individuelles afin de démontrer que le fait d’élaborer une nouvelle fiscalité au sein d’une large catégorie d’impôts pourrait, dans certains cas, permettre un gain d’efficacité non négligeable. Par exemple, des taux réduits d’impôts sur les sociétés pour les petites entreprises ne semble pas augmenter favoriser la croissance; de même, des taux marginaux élevés d’impôts sur les revenus des personnes physiques peut réduire la courbe de la productivité en réduisant l’activité entrepreneuriale. Alors que ce document est centré sur la manière dont les impôts affectent la croissance, il reconnaît qu’une réforme fiscale pragmatique nécessite un équilibre entre efficience, équité, simplicité et levée d’impôts.
    Keywords: taxation, economic growth, productivity, croissance économique, productivité, investment, investissement, tax policy, politique fiscale, imposition, tax design, conception fiscale
    JEL: C33 H23 H24 H25 O40 O43
    Date: 2008–07–03
  2. By: Halla, Martin (University of Linz); Schneider, Friedrich (University of Linz)
    Abstract: While there is an extensive literature on tax evasion a further aspect of cheating on the state, namely benefit fraud, has gained relatively modest attention in the economic literature. This paper seeks to fill this gap. We explore differences between benefit fraud and tax evasion due to differing social norms. We define the concepts of benefit morale and tax morale as the motivation to abstain from cheating on the state via these two offenses. Our multilevel analysis, based on a large micro data set of respondents from 29 OECD member countries, shows that benefit morale and tax morale have different determinants at an individual-level and respond differently to fiscal policy measures.
    Keywords: tax, subsidies, tax evasion, benefit fraud, welfare fraud, tax morale, benefit morale, social norms, multilevel analysis
    JEL: H20 H26 H44 A13
    Date: 2008–06
  3. By: Alex Armstrong; Nick Draper; Ed Westerhout
    Abstract: The expected increase in the ratio of retirees to workers that is due to population ageing is sure to increase pressure on public finances and the Dutch economy in the coming decades. However, because of the uncertainty regarding future demographic developments, the exact extent of the problem is unknown. This paper presents stochastic simulations, i.e. simulations that combine the CGE model of the Dutch economy GAMMA with stochastic population projections.
    Keywords: Demographic Uncertainty; Public Finance; Stochastic Simulations
    JEL: C68 H68 J11
    Date: 2008–04
  4. By: Beetsma, Roel; Ribeiro, Marcos Poplawski; Schabert, Andreas
    Abstract: This paper compares constraints on the public debt with constraints on the primary deficit. The analysis takes into account how an optimizing government reacts to the different constraints when deciding on a spending and borrowing plan. We find that the economy behaves similarly under both constraints, although for our benchmark calibration welfare is higher under the debt constraint. Further, the debt constraint is more robust against changes in the interest rate. Our results lend support to the enhanced focus on the public debt after the recent reform of the Stability and Growth Pact.
    Keywords: fiscal constraints; myopia; social welfare; Stability and Growth Pact
    JEL: E62 H30 H60
    Date: 2008–07

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