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on Public Finance |
| By: | Joel Slemrod (University of Michigan); Christian Traxler (Max Planck Institute for Research on Collective Goods) |
| Abstract: | We study the optimal observability of the tax base within the standard linear income tax problem, where observability is determined by the government’s investment into the accurate measurement of the tax base. We characterize the optimal level of observability and derive a new expression for the optimal progressivity, which – in addition to the standard equity efficiency trade-off – accounts for the limited accuracy of an income tax system. |
| Keywords: | optimal linear income taxation, observability, tax enforcement |
| JEL: | D8 H11 H21 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2010_04&r=pub |
| By: | Alejandro Esteller-Moré (Universitat de Barcelona & IEB); Leonzio Rizzo (Università di Ferrara & IEB) |
| Abstract: | We test for the state interdependence of gasoline and cigarette taxation in the US (1975-2006). We estimate a tax reaction function, and find that state interdependence is due solely to yardstick competition, since any interaction disappears completely in the case of states with lame duck governors. This result holds for both taxes: the short-run reaction of those states whose governor is eligible to stand for reelection is 0.13 and 0.21 for gasoline and cigarette taxation, respectively. In the long run, the cigarette tax rates levied in a jurisdiction match those of its neighbors perfectly, while the long-run reaction in the case of gasoline is much lower at 0.72. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/1/doc2010-3&r=pub |
| By: | Robert S. Chirinko (University of Illinois at Chicago); Daniel J. Wilson (Federal Reserve Bank of San Francisco) |
| Abstract: | The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. We depart from this assumption by allowing policymakers to be influenced by the rent-seeking behavior of businesses. Campaign contributions may affect tax competition and enhance or retard the mobility of capital across jurisdictions. Based on a panel of 48 U.S. states and unique data on business campaign contributions, we find that contributions have a significant direct effect on tax policy, the economic value of a $1 business campaign contribution is nearly $4, the slope of the tax reaction function is negative, and the empirical results are sensitive to state effects. |
| Keywords: | Campaign contributions, business taxation, state tax competition |
| JEL: | H71 H73 H25 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2010/1/doc2010-2&r=pub |
| By: | Szarowska, Irena |
| Abstract: | Enlargement of the European Union and the globalization process significantly affect tax systems and fiscal policies of individual countries. The level and structure of tax burden is often discussed in the European Union, as well as what is more profitable – keeping tax competition or tax harmonization. Tax environment and tax burden are significant factors when deciding about investment allocation. For international comparison, the easiest way is to use statutory tax rates but the result may be rather inaccurate. More convenient way of comparison is comparing implicit rates where we may express impact of taxes on economic activities according to their functions. The paper first summarizes basic theoretic approaches to tax competition. Then it is followed by an analysis of level and structure of tax burden in the European Union in the period of 1995 to 2006. There is emphasis on the dissimilarity of results depending on the type of tax rates used, namely statutory and implicit. The aim is to verify the hypothesis that value of tax burden (measured by tax quota) falls in time and that indirect taxes outweigh direct taxes in the tax burden of the European Union. |
| Keywords: | tax competition; tax burden; tax quota; implicit tax rate |
| JEL: | E62 F2 H2 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19934&r=pub |
| By: | Oya Pinar Ardic; Burcay Erus; Gurcan Soydan |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:bou:wpaper:2010/01&r=pub |
| By: | Urs Fischbacher (University of Konstanz); Simon Gaechter (University of Nottingham) |
| Abstract: | We compare the strategy method and the direct response method in public good experiments in a within-subject design. This comparison is interesting because the strategy method is frequently used to investigate preference heterogeneity. We find that people identified by the strategy method as conditional cooperators also behave as conditional cooperators under the direct response method. Free-rider types contribute systematically less than all others but show the most systematic deviation from the predicted contributions, because they contribute in the first half of the direct response experiment. Overall, our results support the behavioral validity of the strategy method in public good experiments. |
| Keywords: | Public goods experiments, strategy method, direct response method, voluntary cooperation, conditional cooperators, free riders |
| JEL: | C91 C72 H41 D64 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2009-25&r=pub |
| By: | Graves, Philip E. |
| Abstract: | For at least fifty years economists have argued that vertically-aggregated marginal willingness to pay, when set equal to marginal provision cost, will result in optimal public good provision levels. This methodological approach would be expected to yield an exact analog, in terms of optimal levels of public good provision, to efficient provision of private goods in a perfect market setting. There is, however, a potentially serious flaw in the approach as actually practiced, since initial incomes are implicitly–and wrongly–taken to be optimal. From a given income, the output demand revelation problem has long been recognized–that there will be difficulty inferring true demands for public goods at that income (the traditional ‘free rider’ problem). But what has failed to receive widespread recognition among theoreticians, and especially among practitioners, is that there will also be a concomitant ‘input demand revelation’ problem. In any situation where workers cannot individually increment a class of goods by increasing their income (e.g. public goods), they will have no incentive to generate the income that would have been devoted to that class of goods. They will only generate income that is optimal to pay the higher taxes or prices associated with whatever initial public goods levels are provided. As a consequence, the benefit-cost practitioner will, even if somehow able to accurately guess marginal willingness-to-pay out of current income, observe only one apparent optima. There are an infinite number of such optima, one for each level of free riding in input markets, where aggregated marginal willingness-to-pay will appear to equal marginal provision cost. The one true Samuelson ‘optimum optimorum’ occurs when there is free riding in neither output nor input markets (that is, when the ‘full’ demand revelation problem is solved). As a consequence, pure public goods, as well as other ‘non-incrementable’ goods and goods for which non-use values are of importance will be undervalued, hence under-provided. Evidence is presented that the problem raised here might be of importance, undermining the practical significance of the Coase theorem vis-a-vis Pigouvian taxation. |
| Keywords: | environmental economics; willingness-to-pay; willingness-to-accept; benefit-cost analysis; public goods; publicly-provided goods; efficiency |
| JEL: | D62 H0 A1 Q51 A2 H4 H42 Q5 C92 H43 N5 D61 D01 Q58 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19928&r=pub |