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on Public Finance |
| By: | Olivier Bargain (University College of Dublin); Tim Callan (Economic and Social Research Institute) |
| Abstract: | To assess the impact of tax-benefit policy changes on income distribution over time, we suggest a methodology based on counterfactual simulations. We start by decomposing changes in inequal- ity/poverty indices into three contributions: reforms of the tax-benefit structure (rules, rates, etc.), changes in nominal levels of market incomes and tax-benefit parameters (benefit amounts, tax bands, etc.), and all other changes in the underlying population (market income inequality, demographic composition, employment level, etc.). Then, the decomposition helps to extract an absolute measure of the impact of tax-benefit changes on inequality when evaluated against a distributionally-neutral benchmark, i.e. a situation where tax-benefit parameters are adjusted in line with income growth. We apply this measure to assess recent policy changes in twelve European countries. Finally, the full decomposition allows quantifying the relative role of policy changes compared to all other fac- tors. We provide an illustration on France and Ireland and check the sensitivity of the results to the decomposition order. |
| Keywords: | Tax-benefit policy, inequality, poverty, decomposition, microsimulation |
| JEL: | H23 H53 I32 |
| Date: | 2007–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:200713&r=pub |
| By: | James M. Poterba; Todd M. Sinai |
| Abstract: | The mortgage interest deduction, the property tax deduction, the unique treatment of capital gains on owner-occupied homes, and the absence of taxation on imputed rent from owner-occupied homes all influence the effective cost of housing services. They also affect federal income tax revenues and the distribution of income tax liabilities. We draw on household-level data from the 2004 Survey of Consumer Finances to analyze how several potential reforms would affect incentives for housing consumption as well as the distribution of income tax burdens. Our analysis recognizes that changing the mortgage interest deduction would induce changes in household financial behavior. We estimate that repealing the mortgage interest deduction in 2003 would have raised income tax revenues by $72.4 billion in the absence of any portfolio adjustments, but by only $61.9 billion if homeowners responded by drawing down a limited set of financial assets to partially replace their mortgage debt. The revenue effects of changing the property tax deduction similarly depend on how state and local governments alter their mix of revenue instruments in response to federal tax reform. Our results underscore the importance of recognizing behavioral responses when calculating the revenue costs of income tax provisions relating to owner-occupied housing. |
| JEL: | H2 H24 H71 R21 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14253&r=pub |
| By: | Richard M. Bird (University of Toronto); Roy Bahl (University of Toronto; Georgia State University) |
| Abstract: | This paper reviews the literature and evidence on the most appropriate structure of regional and local taxes in developing countries. A good subnational tax system is critical to an effective and sustainable system of intergovernmental fiscal relations – a need that has become increasingly important around the world as more and more public services are being delivered through subnational governments. In most developing countries potentially sound and productive taxes exist that are suitable for regional and local governments: property taxes, taxes on motor vehicles, surcharges on national personal income taxes, payroll taxes, and even, in some cases, regional value added taxes and properly designed local business taxes. |
| Keywords: | local taxes; regional taxes; fiscal decentralization |
| JEL: | H71 H77 O23 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:ttp:iibwps:16&r=pub |
| By: | Costas Meghir (Institute for Fiscal Studies and University College London); David Phillips (Institute for Fiscal Studies) |
| Abstract: | <p><p>In this paper we provide an overview of the literature relating labour supply to taxes and welfare benefits with a focus on presenting the empirical consensus. We begin with a basic continuous hours model, where individuals have completely free choice over their hours of work. We then consider fixed costs of work, the complications introduced by the benefits system, dynamic aspects of labour supply and we place the analysis in the context of the family. The key conclusion of this work is that in order to estimate the impact of tax reform and be able to generalise results, a structural approach that takes account of many of these issues is desirable. We then discuss the 'new Tax Responsiveness' literature which uses the response of taxable income to the marginal tax rate as a summary statistic of the behavioural response to taxation. Underlying this approach is the unsatisfactory nature of using hours as a proxy for labour effort for those with high levels of autonomy on the job and who already work long hours, such as the self employed or senior executives. After discussing relevant theory we then provide a summary of empirical estimates and the methodology underlying the studies. Our conclusion is that hours of work are relatively inelastic for men, but are a little more responsive for married women and lone mothers. On the other hand, participation is quite sensitive to taxation and benefits for women. Within this paper we present new estimates form a discrete participation model for both married and single men based on the numerous reforms over the past two decades in the UK. We find that the participation of low education men is somewhat more responsive to incentives than previously thought. For men with high levels of education, participation is virtually unresponsive; here the literature on taxable income suggests that there may be significant welfare costs of taxation, although much of this seems to be a result of shifting income and consumption to non-taxable forms as opposed to actual reductions in work effort.</p></p> |
| Keywords: | Labour Supply, Income taxation, Welfare Benefits, Tax Credits, Incentive Effects |
| JEL: | J22 H24 H31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:08/04&r=pub |
| By: | Olivier Bargain (University College of Dublin); Amedeo Spadaro (Paris School of Economics) |
| Abstract: | Drawing from the formal setting of the optimal tax theory (Mirrlees 1971), the paper identifies the level of Rawlsianism of some European social planner starting from the observation of the real data and redistribution systems and uses it to build a metric that allows measuring the degree of (dis)similarity of the redistribution systems analyzed. It must be considered as a contribution to the comparative research on the structure and typology of the Welfare State (Esping-Andersen, 1990). In particular we consider the optimal taxation model that combines both intensive (Mirrlees) and extensive (Diamond) margins of labor supply, as suggested by Saez (2002) in order to assess the degree of decommodification of seven European welfare systems. We recover the shape of the social welfare function implicit in taxbenefit systems by inverting the model on actual effective tax rates, as if existing systems were optimal according to some Mirrleesian social planner. Actual distributions of incomes before and after redistribution are obtained using a pan-European tax-benefit microsimulation model. Results are discussed in the light of standard classifications of welfare regimes in Europe. There appears to be a clear coincidence of high decommodification and high Rawlsianism in the Scandinavian, social-democratically influenced welfare states (Denmark). There is an equally clear coincidence of low decommodification and utilitarianism in the Anglo–Saxon liberal model (UK) and in the Southern European welfare states (Italy and Spain). Finally, the Continental European countries (Finland, Germany and France) group closely together in the middle of the scale, as corporatist and etatist. |
| Keywords: | Optimal income taxation, tax-benefit policy, microsimulation, comparative social policy analysis, welfare state models |
| JEL: | H11 H21 D63 C63 |
| Date: | 2008–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:200816&r=pub |
| By: | Arefiev, Nikolay; Baron, Tatyana |
| Abstract: | We find the optimal capital income tax rate in an imperfectly competitive economy, where some part of recourses is devoted to rent-seeking activity. Optimal tax offsets the difference between marginal social and marginal private return to capital, which is a result of rent seeking, and the difference between the before tax interest rate and the marginal productivity of capital, which arises from imperfect competition. Optimal capital income tax rate depends neither on other tax rates nor on overall tax burden. Numerically it is close to zero. |
| Keywords: | Capital taxation, rent seeking, imperfect competition |
| JEL: | E62 H21 |
| Date: | 2006–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9988&r=pub |
| By: | Dracea, Raluca; Cristea, Mirela; Ciupeanu, Daniela |
| Abstract: | This paper focused on the green taxes, great actuality issue in the contemporary world. As research method, the paper is based on economical theory of externalities, their presence making the company to take decisions with different social effects. Starting from social cost and private cost of human activity, it is a debate regarding the internalization of external costs by applying the corrective taxes. The purpose of this paper it is the establishing of an optimal tax level which has as effect the decreasing of the overall cost of a negative externality (for example, the pollution) through controlling the external effects. Deriving from the analysis it has been disclosed that ideally the environmental taxes should be introduced over externalities source, meaning that taxes should report directly over emissions or environment services. |
| Keywords: | green taxes; pigouvian taxes; negative externalities; internalization of the polluting costs |
| JEL: | H23 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10075&r=pub |
| By: | Davide Furceri (European Central Bank and University of Palermo. European Central Bank, Directorate General Economics, Kaiserstraße 29, D-60311 Frankfurt am Main, Germany.); Marcos Poplawski Ribeiro (CEPII and University of Amsterdam. CEPII - Centre d’etudes prospectives et d’informations internationales, 9, rue Gerges Pitard - 75740, Paris, France.) |
| Abstract: | This paper provides empirical evidence showing that smaller countries tend to have more volatile government spending for a sample of 160 countries from 1960 to 2000. We argue that the larger size of a country decreases the volatility of government spending because it acts as an insurance against idiosyncratic shocks, and it leads to increasing returns to scale due to the higher ability of the government to spread its cost of financing over a larger pool of taxpayers. The results are robust to different time and country samples, different econometric techniques and to several sets of control variables. The analysis also evinces that country size is negatively related to the discretionary part of government spending and to the volatilities of most of the government spending items. JEL Classification: E62, H10. |
| Keywords: | Fiscal Policy, government size, fiscal volatility, country size. |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080924&r=pub |