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on Public Finance |
| By: | Johann K. Brunner; Paul Eckerstorfer; Susanne Pech |
| Abstract: | This article incorporates tax evasion into an optimum taxation framework with individuals differing in earning abilities and initial wealth. We find that despite the possibility of its evasion a tax on initial wealth should supplement the optimal nonlinear income tax, given a positive correlation between initial wealth and earning abilities. Further, even if income and initial wealth are taxed optimally, it is still desirable to levy a tax on commodities, though it can be evaded as well. Thus, our result provides a rationale for a comprehensive tax system. Optimal tax rates on commodities differ in general, however for the special case of a uniform evasion technology it turns out that equal rates are optimal if preferences are homothetic and weakly separable. |
| Keywords: | Optimal Taxation, Tax Evasion |
| JEL: | D82 H21 H24 H26 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2010_04&r=pub |
| By: | Philip DeCicca; Donald S. Kenkel; Feng Liu |
| Abstract: | We conduct an empirical study of the impact of consumer price-search on the shifting of cigarette excise taxes to consumer prices. We use novel data on the prices smokers report actually paying for cigarettes. We document substantial price dispersion. We find that cigarette taxes are shifted at lower rates to the prices paid by consumers who undertake more price search – carton buyers, and especially, smokers who buy cartons of cigarettes in a state other than their state of residence. We also find suggestive evidence that taxes are shifted at slightly higher rates to the prices paid by non-daily smokers, less addicted smokers, and smokers of light cigarettes. |
| JEL: | H22 I18 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15942&r=pub |
| By: | Philip DeCicca; Donald S. Kenkel; Feng Liu |
| Abstract: | In this paper we contribute new empirical results about consumers’ decisions to avoid cigarette excise taxes, and a new applied welfare economic analysis of optimal excise taxation with tax avoidance. We examine direct measures of consumer excise tax avoidance in novel individual-level data from the 2003 and 2006 - 2007 Tobacco Use Supplements to the U.S. Current Population Survey. We estimate reduced-form models and a structural endogenous switching regression model. In the structural border-crossing equation, the decision to cross the border depends on the difference between the endogenous home- and border-state prices. The reduced-form and structural results show that the probability of cross-border cigarette purchases responds in predictable ways to the economic incentives created by the distance to the border and state tax differentials. To our knowledge, we are also the first study to extend the formula for optimal Pigouvian corrective taxation to incorporate excise tax avoidance. Taking into account tax avoidance implies the optimal tax is substantially below the simple Pigouvian tax that internalizes external costs. In illustrative calculations for 2003, we find that in 20 states the optimal tax that accounts for tax avoidance is at least 20 percent smaller than the simple Pigouvian tax. |
| JEL: | H21 H26 I18 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15941&r=pub |
| By: | Giorgio Coricelli (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); Claude Montmarquette (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | The economics-of-crime approach usually ignores the emotional cost and benefit of cheating. In this paper, we investigate the relationships between emotions, deception, and rational decision-making by means of an experiment on tax evasion. Emotions are measured by skin conductance responses and self-reports. We show that the intensity of anticipated and anticipatory emotions before reporting positively correlates with both the decision to cheat and the proportion of evaded income. The experienced emotional arousal after an audit increases with the monetary sanctions and the arousal is even stronger when the evader's picture is publicly displayed. We also find that the risk of a public exposure of deception deters evasion whereas the amount of fines encourages evasion. These results suggest that an audit policy that strengthens the emotional dimension of cheating favors compliance. |
| Keywords: | deception ; tax evasion ; emotions ; physiological measures ; experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00462067_v1&r=pub |
| By: | Kerry Papps (Nuffield College) |
| Abstract: | sing worker-level panel data for Turkey, this paper analyses the separate employment effects of increases in the social security taxes paid by employers and increases in the minimum wage between 2002 and 2005. Variation over time and among low-wage workers in the ratio of total labour costs to the gross wage gives rise to a natural experiment. Regression estimates indicate that a given increase in social security taxes has a larger negative effect on the probability of a worker remaining employed in the next quarter than an equal-sized increase in the minimum wage. Those who retain their jobs in the next quarter also experience a larger reduction in working hours when social security taxes increase than when the minimum wage rises. This is consistent with a situation in which workers increase effort in response to an increase in wages. Men, rural-dwellers and those under 30 are found to have the strongest overall disemployment effects in response to increases in labour costs. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1017&r=pub |
| By: | Skidmore, Mark (Michigan State University); Tosun, Mehmet S. (University of Nevada, Reno) |
| Abstract: | In 1994 a limit on the growth of property values for tax purposes was imposed in Michigan. One consequence of the newly imposed assessment growth cap was an emerging differential in tax prices between potential new property owners and long-time property owners. The purpose of this paper is to examine the impact of this growing tax price differential on migration patterns. Using county level data on migration activity over the 1994-2006 period, we present evidence that differential tax prices resulting from the assessment growth cap have reduced in-migration. |
| Keywords: | property tax, tax base erosion, regional migration, Michigan |
| JEL: | H71 H73 J61 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4906&r=pub |