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on Public Finance |
| By: | Strulik, Holger; Trimborn, Timo |
| Abstract: | We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70-90 percent and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3 to 1.2 percent after abolishment of the tax. |
| Keywords: | corporate taxation, capital gains, tax allowances, revenue estimation, Laffer curve, dynamic scoring |
| JEL: | E60 H20 O40 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-454&r=pub |
| By: | Virginie Piguet; Sonia Paty; Sylvie Charlot |
| Abstract: | The main purpose of this paper is to assess the effects of fiscal cooperation on local taxation in a decentralized country, using the French experience. We estimate a model of tax setting for local business tax using spatial and dynamic econometric techniques, for the period 1993-2003. We find first that reducing the number of municipalities is likely to limit tax competition and increase local business tax rates as a consequence. Second, we find that tax rates are higher when groups of localities set a single business tax rate rather than applying an additional rate of business tax, suggesting that horizontal tax competition constrains the level of tax rate increase generated by tax-base sharing. |
| Keywords: | Consolidation, Tax competition, Vertical externalities, Local business tax |
| JEL: | H2 H3 H7 |
| Date: | 2010–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:ceo:wpaper:2&r=pub |
| By: | Engström, Per (Uppsala Center for Fiscal Studies) |
| Abstract: | The paper extends Ng’s (1987) model of optimal taxation of diamond goods — goods that are valued solely for their costliness. We extend his findings by analyzing how other goods should be taxed in the presence of pure diamond goods; modified Ramsey rules are derived in a basic single-type model as well as in a two-type model with redistribution. One key finding, that may be surprising and rather provoking, is that close complements (hip hop music) to diamond goods (bling bling) should be heavily subsidized. |
| Keywords: | optimal taxation; status; luxury taxation |
| JEL: | H20 H21 |
| Date: | 2010–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2010_007&r=pub |
| By: | Salvador Barrios; Sven Langedijk; Lucio Pench |
| Abstract: | Summary for non-specialistsThe global financial crisis has led to a sharp deterioration of EU countries' public finances. Views are split regarding the most appropriate consolidation strategy to follow, in particular considering: the timing of fiscal consolidation in relation to the path of economic recovery reflecting (a) the trade-off between consolidation and stabilisation; (b) fiscal consolidation in the context of a distressed banking system where the credit channel is hampered and without which economic recovery can hardly take place, (c) the absence of exchange rate adjustment in the euro area which could make it more difficult for countries with competitiveness problems to achieve successful fiscal consolidation. The existing literature on fiscal consolidations provides only partial evidence on these issues.In this paper our objective is to focus on the above points of discussion drawing on EU (and non-EU OECD) experiences during the period 1970-2008. We estimate econometrically the determinants of successful fiscal consolidations and show that: (i) in presence of a systemic financial crisis, the repair of the banking sector is a pre-condition for a fiscal consolidation to succeed in reducing debt levels (ii) even after the banking sector is repaired, fiscal consolidations are usually less successful than in absence of financial crises, although more vigorous fiscal consolidations (i.e. cold shower) tend to yield higher results (iii) current debt dynamics in the EU are very unfavourable and in some cases, coupled with rising debt servicing costs and much deteriorated growth outlook warranting differentiated consolidation strategies across EU countries (iv) We do not find conclusive evidence in support of exchange rates (including real exchange rate) depreciation/devaluation as enhancing the success of fiscal consolidation as their effect appear to be low and insignificant. |
| Keywords: | Fiscal consolidation financial crisis debt barrios langedijk pench |
| JEL: | H3 H6 E44 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0418&r=pub |
| By: | Salvador Barrios; Raffaele Fargnoli |
| Abstract: | Summary for non-specialistsThis paper examines the influence of governments' discretionary measures on tax revenues and tax elasticity in the European Union during the run-up to the 2008/2009 global financial crisis which was characterised by large swings in tax revenues.Using data collected in the context of the Output Gap Working Group of the Economic Policy Committee we show that while discretionary measures have had a limited impact on tax yields, they have in some cases significantly affected tax elasticities and thereby altered the relationship between tax revenues and the business cycle which plays a key role in the EU fiscal surveillance framework. Furthermore we provide evidence on the pro-cyclical nature of discretionary measures affecting tax revenues whereby governments tend to implement tax cuts during expansionary phases while resorting to tax increases during slowdowns. More generally our results suggest that the availability of detailed projections on the impact of discretionary measures by broad tax category would be instrumental to a better monitoring of tax revenues developments in the EU in order to better identify the role played by non-policy factors (such as asset prices) in driving tax revenues. Given that the time span covered by this database is in most cases still relatively short (covering on average 7 to 8 years) future updates of the data would allow to further dig into the issue of the influence of discretionary measures on tax elasticities as well as to provide elements for a backward assessment of fiscal plans vs. outcome. |
| Keywords: | financial crisis barrios Taxation discretionary measures fiscal policy financial crisis fiscal stance business cycle Fargnoli |
| JEL: | H2 E6 H6 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0419&r=pub |