nep-pub New Economics Papers
on Public Finance
Issue of 2008‒11‒11
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Are Progressive Income Taxes Stabilizing?--A Reply By Chen, Yan; Zhang, Yan
  2. Property taxes and elderly mobility By Hui Shan
  3. Optimal tax policy and expected longevity: a mean and variance approach By LEROUX, Marie-Louise; PONTHIERE, Grégory
  4. Mixed duopoly, privatization and the shadow cost of public funds By Carlo, CAPUANO; Giuseppe, DE FEO
  5. Tax and Pension Reform in the Czech Republic-Implications for Growth and Debt Sustainability By Anita Tuladhar; Dennis P. J. Botman
  6. Tax Administration Reform and Fiscal Adjustment:The Case of Indonesia(2001-07) By Eric Le Borgne; John Brondolo; Frank Bosch; Carlos Silvani

  1. By: Chen, Yan; Zhang, Yan
    Abstract: Dromel and Pintus [Are Progressive Income Taxes Stabilizing?, Journal of Public Economic Theory 10, (2008) 329-349] have shown that labor-income tax progressivity reduces the likelihood of local indeterminacy, sunspots and cycles in a one sector monetary economy with constant returns to scale. In this note, we extend Dromel and Pintus (2008) into a two sector monetary economy with constant returns to scale studied by Bosi et al. (2007) and reassess the stabilizing effect of progressive income taxes. We show that the result in Dromel and Pintus (2008) is robust to this extension, which means that changes of the production structure won't affect the stabilizing effect of progressive income taxes, i.e., tax progressivity (regressivity) reduces (increases) the likelihood of local indeterminacy, sunspots and cycles.
    Keywords: Tax Progressivity; local indeterminacy
    JEL: E32 P35
    Date: 2008–11–06
  2. By: Hui Shan
    Abstract: The recent housing market boom in the U.S. has caused sharp increases in residential property taxes. Housing-rich but income-poor elderly homeowners often complain about rising tax burdens, and anecdotal evidence suggests that some move to reduce their tax burden. There has been little systematic analysis, however, of the link between property tax levels and the mobility rate of elderly homeowners. This paper investigates this link using household-level panel data from the Health and Retirement Study (HRS) and a newly collected dataset on state-provided property tax relief programs. These relief programs generate variation in effective property tax burdens that is not due solely to arguably endogenous local community choices about taxes and expenditure programs. The findings provide evidence suggesting that higher property taxes raise mobility among elderly homeowners. The point estimates from instrumental variable estimation using relief programs to generate instruments suggest that a $100 increase in annual property taxes is associated with a 0.76 percentage point increase in the two-year mobility rate for homeowners over the age of 50. This is an eight percent increase from the baseline two-year mobility rate of nine percent. These results are robust to alternative specifications.
    Date: 2008
  3. By: LEROUX, Marie-Louise (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); PONTHIERE, Grégory
    Abstract: This paper studies the normative problem of redistribution between agents who can influence their survival probability through private health spending, but who differ in their attitude towards the risks involved in the lotteries of life to be chosen. For that purpose, we develop a two-period model where agents's preferences on lotteries of life can be represented by a mean and variance utility function allowing, unlike the expected utility form, some – agent-specific – sensitivity to what Allais (1953) calls the 'dispersion of psychological values'. It is shown that if agents ignore the impact of their health expenditures on the return of their savings, the decentralization of the first-best optimum requires not only intergroup lump-sum transfers, but, also, group-specific taxes on health spending. Under asymmetric information, we find that a subsidy on savings is optimal, whereas group-specific taxes on health spending are of ambiguous signs.
    Keywords: longevity, risk, lotteries of life, expected utility theory, health spending.
    JEL: D81 H21 I12 I18 J18
    Date: 2008–06
  4. By: Carlo, CAPUANO; Giuseppe, DE FEO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: The purpose of this paper is to investigate the effect of privatization in a mixed duopoly, where a private firm complete in quantities with a welfare-maximizing public firm. We consider two inefficiencies of the public sector : a possible cost inefficiency and an allocative inefficiency due to the distortionary effect of taxation (shadow cost of public funds). Furthermore, we analyze the effect of privatization on the timing of competition by endogenezing the determiantion of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games using the model developed by Hamilton and Slutsky (1990). The latter is especially relevant for the analysis of privatization, given that results and policy prescription emerged in the literature crucially rely on the type of competition assumed. We show that privatization has generally the effect of shifting from Stackelberg to Cournot equilibrium and that, absent efficiency gains privatization never increases welfare. Moreover, even when large efficiency gains are realized, an inefficient public firm may be preferred.
    Keywords: mixed oligopoly, privatization, endogenous timing, distortionary taxes
    JEL: H2 H42 L13 L32 L33
    Date: 2008–04–29
  5. By: Anita Tuladhar; Dennis P. J. Botman
    Abstract: The Czech Republic has embarked on an ambitious tax reform and expenditure package to bring the deficit sustainably below 3 percent, and intends to reduce the deficit to 1 percent of GDP by 2012. To address the long-term fiscal challenge due to population aging, pension reform proposals are also being considered. In this paper we assess the macroeconomic effects of these measures using the Global Fiscal Model. The tax reform package will achieve a more efficient tax system. If implemented successfully with the intended expenditure savings measures, debt is projected to improve markedly while output would expand. Fiscal sustainability will not be restored, however, even if further measures to bring the deficit to 1 percent of GDP by 2012. Instead, raising the retirement age and prefunding future aging costs would be needed to keep debt below 60 percent of GDP through 2050.
    Keywords: Czech Republic , Tax reforms , Fiscal policy , Budget deficits , Aging , Population , Pensions , Debt sustainability ,
    Date: 2008–05–15
  6. By: Eric Le Borgne; John Brondolo; Frank Bosch; Carlos Silvani
    Abstract: Tax administration reforms can play an important role in fiscal adjustment. This role is examined by reviewing Indonesia's tax reform cum fiscal adjustment experience since 2001. The paper describes Indonesia's fiscal adjustment strategy, its tax administration reforms, and assesses the impact of these reforms on fiscal adjustment. Evidence suggests tax administration improvements had a strong positive impact on the tax yield and a positive effect on the investment climate. Lessons are presented for designing tax administration reforms within the context of a fiscal adjustment program and reform priorities are identified for Indonesia's ongoing efforts to strengthen tax administration.
    Keywords: Indonesia , Tax administration , Tax reforms , Fiscal reforms , Investment ,
    Date: 2008–05–22

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