nep-pub New Economics Papers
on Public Finance
Issue of 2010‒02‒05
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The long run effects of changes in tax progressivity By Daniel R. Carroll; Eric R. Young
  2. Research in Accounting for Income Taxes By John Graham; Jana Raedy; Douglas Shackelford
  3. Estate Taxation and Intergenerational Transfers By Tullio Jappelli; Mario Padula; Giovanni Pica
  4. Partisan politics in corporate tax competition By Osterloh, Steffen; Debus, Marc
  5. PAYG pensions, tax-cum-subsidy and optimality By Fanti, Luciano; Gori, Luca
  6. All is Quiet in the Fiscal Front: Fiscal Policy for the Global Economic Crisis By Matías Vernengo

  1. By: Daniel R. Carroll; Eric R. Young
    Abstract: This paper compares the steady state outcomes of revenue-neutral changes to the progressivity of the tax schedule. Our economy features heterogeneous households who differ in their preferences and permanent labor productivities, but it does not have idiosyncratic risk. We find that increases in the progressivity of the tax schedule are associated with long-run distributions with greater aggregate income, wealth, and labor input. Average hours generally declines as the tax schedule becomes more progressive implying that the economy substitutes away from less productive workers toward more productive workers. Finally, as progressivity increases, income inequality is reduced and wealth inequality rises. Many of these results are qualitatively different than those found in models with idiosyncratic risk, and therefore suggest closer attention should be paid to modeling the insurance opportunities of households.
    Keywords: Taxation ; Income tax
    Date: 2009
  2. By: John Graham; Jana Raedy; Douglas Shackelford
    Abstract: This paper comprehensively reviews Accounting for Income Taxes (AFIT). The first half provides background and a primer on AFIT. The second half reviews existing studies in detail and offers suggestions for future research. We emphasize the research questions that have been addressed (most of which relate to whether the tax accounts are used to manage earnings, and whether the tax accounts are priced by equity market participants) and highlight areas that have not received much research attention. We close with a call for a theoretical framework, more study of the inconsistencies between research and practice, and improved econometrics.
    JEL: H25 M41
    Date: 2010–01
  3. By: Tullio Jappelli (University of Naples Federico II, CSEF and CEPR); Mario Padula (University “Ca’ Foscari” of Venice and CSEF); Giovanni Pica (University of Salerno and CSEF)
    Abstract: We estimate the effect of estate taxation on bequests exploiting a sequence of Italian reforms culminated with the reduction of estate taxes in 1999 and their abolishment in 2001. To perform our exercise, we use the 1993-2006 Survey of Household Income and Wealth, which has data on real estate transfers and information on potential donors as well as recipients. Our sample includes data on 34,885 owners of real estate wealth and 120,686 potential donors. Differences-in-differences estimates indicate that the abolition of estate taxes has increased the propensity to transfer real estate wealth by about 2 percentage points, and square meter transferred by about 4 points.
    Date: 2010–01–18
  4. By: Osterloh, Steffen; Debus, Marc
    Abstract: This paper studies the effects of political factors, mainly partisanship, on corporate taxes in the past 30 years - a period of intensifying competitive pressure in Europe. Extending the Zodrow-Mieszkowski model by decision-makers who have ideological preferences yields the hypothesis that left-wing leaders set higher corporate tax rates. In the empirical analysis, we introduce a sophisticated measure of ideology derived from content analysis of party manifestos into the literature dealing with partisan effects on tax policy. We can confirm our main hypothesis, but we also find evidence that this partisan effect declines in the course of time. Moreover, we are able to reveal that this effect is mainly driven by the legislatures' stance on welfare policies. Finally, we show that a higher degree of government fragmentation, as well as the leadership of a head of state with an educational background in law counteracts the general tendency to lower tax rates. --
    Keywords: company taxation,tax competition,political ideology,partisan politics
    JEL: H25 H87 D78
    Date: 2009
  5. By: Fanti, Luciano; Gori, Luca
    Abstract: Using a simple OLG small open economy with endogenous fertility we show that the command optimum can be decentralised in a market setting using both a PAYG transfer from the young (old) to the old (young) and a tax-cum-subsidy (subsidy-cum-tax) policy, to redistribute within the working age generation. The latter instrument, in fact, reduces (increases) the opportunity cost of bearing children and, hence, stimulates (depresses) fertility. The policy implications are straightforward: when PAYG transfers exist and child rearing is time consuming, a tax-cum-subsidy (subsidy-cum-tax) policy can be used to internalise the externality of children, while also representing a Pareto improvement.
    Keywords: Overlapping generations; PAYG Pensions; Small open economy; Tax-cum-subsidy
    JEL: J13 H55 H24 J26
    Date: 2010–01–23
  6. By: Matías Vernengo
    Abstract: The current economic global crisis has thrown fiscal policy onto the center stage. However, the current crisis episode has not produced any change regarding the standing role and function of fiscal policy in developed and developing market economies that has dominated the economics profession for decades. In fact, the uncertain prospects for recovery underscore the fact that free market economies lack the mechanisms to bring about and maintain full employment. Full employment requires designing and making operational institutions at the national and global levels that can manage aggregate demand. This paper reviews the evidence on current fiscal efforts around the world.
    Keywords: Fiscal Policy, Fiscal Deficit
    JEL: E62 H62
    Date: 2010–02

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