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on Public Finance |
| By: | Vieri Ceriani (Banca d'Italia); Stefano Manestra (Banca d'Italia); Giacomo Ricotti (Banca d'Italia); Alessandra Sanelli (Banca d'Italia); Ernesto Zangari (Banca d'Italia) |
| Abstract: | This paper investigates the effects of the tax system on the economic factors that triggered the financial crisis. We examine three cases in which the tax regime interacted with these factors, reinforcing them. First, we focus on the taxation of residential building: while the importance of capital gains taxes is disputed, the deductibility of mortgage interest may have contributed to the financial crisis by creating some of the raw materials for the securitization industry. Second, a narrow perspective on the tax treatment, together with specific provisions, may have fostered performance-based remuneration of managers, resulting in overemphasis of short-term profitability and incentive to excessive risk-taking. Third, the securitization process, which played a key role in the outbreak of the financial crisis, was accompanied by opportunities for tax arbitrage and reduction of the overall tax wedge paid by investors, through offset of incomes that are ordinarily taxed at different rates; a de facto exemption of CDS premiums received by non-residents supplemented the tax arbitrage. |
| Keywords: | taxation, financial crisis, housing market, stock options, securitization, credit default swaps |
| JEL: | H2 G1 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_85_11&r=pub |
| By: | Christian Lehmann (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | High levels of inequality are a persistent feature of many rural areas in the developing world. Rural inequality is correlated with major impediments of rural development, such as crime, elite-capture, and lack of collective action. Government transfer programs, such as conditional cash transfer, unemployment insurance, old-age pension or similar programs that target the lower tail of a village's cumulative welfare distribution function have become a very popular public policy to tackle poverty and inequality in rural areas. While the poverty impacts of those programs are well documented in the literature less attention has been given to the redistributive capacity of such policies at the village level. Among the main reasons for the neglect is a common belief that monetary transfers to the lower tail of the village welfare distribution (i.e. ‘the poor'), while excluding the upper tail (i.e. ‘the rich') from the program, must lead to a reduction in inequality. In this paper we show that the impact of such programs on reducing rural inequality may be lower than previously thought. This is because program-eligible lower and program-ineligible upper tail do not behave in isolation from each other. They are linked via interactions in credit & insurance, as well as factor & commodity markets. If, consequently, a government transfer triggers the lower tail to shift then the upper tail follows, leading to modest reductions in local inequality. |
| Keywords: | evaluation of public policies ; inequality ; poverty ; microsimulation ; externalities |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00564924&r=pub |
| By: | Dean Baker |
| Abstract: | This paper outlines a proposal for a default savings plan that is intended to provide an important supplement to retirement income for the bottom half of the workforce, most of whom have little other than Social Security to support themselves in retirement at present. Under the proposal, workers would make a default contribution of 3.0 percent on annual wages up to $40,000. They could opt out from this contribution if they choose. The contribution would be automatically turned into an annuity at retirement although workers would have the option to make a lump sum withdrawal after paying a modest penalty. The lowest income workers would get a modest contribution paid into the system by the government based on their earnings. This payment would be modeled along the lines of the Earned Income Tax Credit, with the payment increasing with earnings up to $8,000 and then phasing down to zero with earnings above $20,000. There would also be a match of savings that phases down to zero at $40,000. |
| Keywords: | social security, retirement |
| JEL: | H H5 H55 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2011-03&r=pub |
| By: | Rupayan Pal (Indira Gandhi Institute of Development Research); Bibhas Saha (University of East Anglia) |
| Abstract: | This paper shows that, in case of differentiated products mixed duopoly, environmental damage increases (decreases) with the level of privatization, if the level of privatization is less (more) than certain level. It also shows that partial privatization is optimal from the social welfare point of view. However, the social welfare maximizing level of privatization damages the environment most. |
| Keywords: | Privatization, mixed duopoly, environmental damage, environmental tax, social welfare |
| JEL: | H23 Q50 Q58 L13 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2010-018&r=pub |
| By: | Niek Schoeman |
| Abstract: | This paper analyses fiscal performance in terms of own-revenue collection and sustainability of local municipalities in South Africa. Criteria such as gross value added, revenue collected from own sources, debtors outstanding, the ageing of debt and dependency on grants are considered. The conclusion is that a large number of municipalities do not comply with the requirement that a ‘reasonable’ amount of current expenditures be financed by means of own resources. Furthermore, local government finances are featured by substantial variance as far as collection of own income is concerned. While close to half of them finance more than 50 percent of their current expenditures from own resources, about one third are largely dependent on grants from upper spheres of government and generate less than 20 percent of current expenditures from own resources. As a whole, the fiscal sustainability of the local government sector, given the current scenario of flows, is a reason for concern. In order to comply with international criteria for solid fiscal performance, a number of municipalities will have to improve their performance with regard to own-revenue collection. The reason for this phenomenon seems to be the problem of ‘soft budgets’ and an historic dependence on grants to finance not only capital expenditures but also most, if not all of, current expenditures. Due to historical and political factors, local governments in South Africa differ substantially in terms of potential revenue base, but it may be that in many cases potential revenue is not exploited and that the high level of dependency on grants is the result of inefficiency and lack of political will to be more self-reliant. In view of the wide-spread protest actions against poor quality of service delivery at the local government level, fiscal authorities should take a fresh look at the extent to which these governments are accountable for being more financially independent. This would help prevent the accumulation of debt as a result of growing backlogs in service payments. |
| Keywords: | Local government; fiscal sustainability; South Africa. |
| JEL: | H71 H72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:201&r=pub |