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on Public Finance |
| By: | Claus Thustrup Kreiner (Department of Economics, University of Copenhagen); Nicolaj Verdelin (Department of Economics, University of Copenhagen) |
| Abstract: | There currently exist two competing approaches in the literature on the optimal provision of public goods. The standard approach highlights the importance of distortionary taxation and distributional concerns. The new approach neutralizes distributional concerns by adjusting the non-linear income tax, and finds that this reinvigorates the simple Samuelson rule when preferences are separable in goods and leisure. We provide a synthesis by demonstrating that both approaches derive from the same basic formula. We further develop the new approach by deriving a general, intuitive formula for the optimal level of a public good without imposing any separability assumptions on preferences. This formula shows that distortionary taxation may have a role to play as in the standard approach. However, the main determinants of optimal provision are completely different and the traditional formula with its emphasis on MCF only obtains in a very special case. |
| JEL: | H41 H23 H11 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:epruwp:08-05&r=pub |
| By: | Moreno-Dodson, Blanca; Wodon, Quentin |
| Abstract: | Governments in low-income countries have the difficult task of making wide-ranging decisions about public spending, taxation, and borrowing with the aim of helping their countries maintain long-term debt sustainability, achieve higher economic growth, and ultimately reduce poverty. Making such decisions is difficult because it involves considering multiple trade-offs. There are at least four reasons why designing and implementing fiscal policies that contribute to growth and poverty reduction are particularly challenging tasks in developing countries. First, private-market failures are widespread and often unpredictable. Second, government and institutional failures also limit the effectiveness of public interventions. Third, raising public revenues is difficult in a context of macroeconomic and growth instability, high debt ratios, weak tax administration, and large informal sectors. Finally, many developing countries lack the data necessary to conduct a thorough analysis of the effect of government policies on the poor segments of the population. Despite those challenges, however, the budget remains one of the most important instruments (together with laws and regulations) that governments have at their disposal to foster poverty reduction. Policy makers in both developing and developed countries, as well as nongovernmental or-ganizations and providers of aid, can benefit from a deeper understanding of how internally or externally financed public funds channeled through the budget can be used more successfully to benefit the poor in a realistic manner. This paper, which serves as an introduction to an edited volume on "Public Finance for Poverty Reduction" starts with a brief discussion of the rationale behind the role of the government in public finance. Then we discuss some of the limitations faced by governments in developing countries. We follow those discussions with an overview of the nature and structure of the material presented in the book and with our thoughts on germane topics yet to be addressed adequately. |
| Keywords: | Public finance; poverty reduction; taxation; debt sustainability; public expenditure; incidence analysis |
| JEL: | E62 F34 H2 H63 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11078&r=pub |
| By: | Rosanne Altshuler; Alan J. Auerbach; Michael Cooper; Matthew Knittel |
| Abstract: | Recent data present a puzzle: the ratio of corporate tax losses to positive income was much higher around 2001 than in earlier recessions. Using a comprehensive 1982-2005 sample of U.S. corporation tax returns, we explore a variety of potential explanations for this surge in tax losses, taking account of the significant use of executive compensation stock options beginning in the 1990s and recent temporary tax provisions that might have had important effects on taxable income. We find that losses rose because the average rate of return of C corporations fell, rather than because of an increase in the dispersion of returns or an increase in the gap between corporate profits subject to tax and NIPA corporate profits. Our analysis also suggests that the increasing importance of S corporations may help explain the recent experience within the C corporate sector, as S corporations have exhibited a different pattern of losses in recent years. However, we can identify no simple explanation for this differing experience. Our investigation concludes with some new puzzles: why did rates of return of C corporations fall so much early in the decade and why has the incidence of losses among C and S corporations diverged? |
| JEL: | H25 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14405&r=pub |
| By: | Morawski, Leszek (Warsaw University); Myck, Michal (DIW Berlin) |
| Abstract: | In 2007 and 2008 Polish governments introduced a series of reforms which led to a substantial reduction in the tax "wedge" (in Polish: "klin") on labour. We show that when considered together the package of introduced reforms brought much greater reductions in the tax burden compared to a widely discussed 15% "flat tax". In the analysis we show the effects of the reforms both for the employed and for the non-employed populations. The latter analysis is done in such a way as to account for the entire (simulated) distribution of wages of the non-employed and shows interesting differences between the effects of reforms on employed and non-employed individuals. We argue that to fully appreciate the effect of reductions in labour taxation it is important to bear in mind that one of the reasons for introducing them is to make employment more likely for those who currently do not work. Given the extent of the reductions in the "klin" it is somewhat surprising that so far so little attention has been given to the recent Polish reforms. |
| Keywords: | work incentives, tax wedge, labour costs, employment |
| JEL: | H24 J21 J31 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3746&r=pub |