nep-pub New Economics Papers
on Public Finance
Issue of 2011‒03‒05
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Economics of Excise Taxation By Sijbren Cnossen
  2. Individual Income Taxation: Income, Consumption, or Dual? By Robin Boadway
  3. Wealth and Wealth Transfer Taxation: A Survey By Helmuth Cremer; Pierre Pestieau
  4. Direct versus Indirect Taxation: Trends, Theory and Economic Significance By Jorge Martinez-Vazquez; Violeta Vulovic; Yongzheng Liu
  5. Tax Evasion, Information Reporting, and the Regressive Bias Hypothesis By Simon Halphen Boserup; Jori Veng Pinje
  6. The demand for income tax progressivity in the growth model By Daniel R. Carroll
  7. Tax Systems in the OECD: Recent Evolution, Competition and Convergence By Vito Tanzi
  8. The Challenges of Corporate Income Taxes in a Globalised World By Emilio Albi
  9. Financing Subnational Governments with Decentralized Taxes By Roy Bahl
  10. Political Regimes, Institutions and the Nature of Tax Systems By Stanely L. Winer; Lawrence W. Kenny; Walter Hettich

  1. By: Sijbren Cnossen (Univesrity of Maastricht and Erasmus Univeristy Rotterdam)
    Abstract: This paper reviews the economics of taxation. It falls into three parts. The first part examines the rationale of excise taxation by reference to the non-revenue objectives that are pursued through the imposition of the various duties. The second part discusses the instruments that can be applied, i.e. duties, regulations and permits. The third part reviews some issues - discrimination, coordination and earmarking - that often arise in connection with excise taxation.
    Date: 2010–05–01
  2. By: Robin Boadway (Queen's University, Canada and CEDifo)
    Abstract: In the course of our study of individual tax systems, we necessarily touch on all of the above issues. Before doing so, it is worth emphasizing that the personal tax is one of three main broad-based taxes whose bases overlap to a considerable extent, the others being the VAT and payroll taxes. The bases of the latter two taxes are roughly similar in present value terms. They differ only to the extent that an individual’s net inheritances (the present value of inheritances less bequests) and other net transfers are positive. Both are essentially taxes that distort the labor-leisure choice (including the participation decision), at least to the extent that payroll taxes are not used to finance actuarially fair transfer programs. Thus, if payroll taxes finance the equivalent of fully contributory pension funds, they are unlikely to impose a distortion on the labor-leisure choice. In practice, payroll taxes are usually not earmarked to individual accounts so this is not an issue. Since for most taxpayers the bulk of taxable income consists of labor income, there is considerable overlap among the three bases. The main difference is that individual taxes might include elements of capital income in the base (for which the overlap might be with wealth or property taxes). That being the case, the overall tax rate faced by individuals includes all three tax rates.
    Date: 2010–05–01
  3. By: Helmuth Cremer (Toulouse School of Economics (GREMAQ and IDEI); Pierre Pestieau (CREPP, University of LIege and CORE)
    Abstract: This paper provides a survey of the theoretical literature on wealth and wealth transfer taxation. Both forms of taxation are highly controversial and we present arguments in favor and against them. We adopt a theoretical and normative perspective. Our approach is comprehensive in the sense that wealth taxation is discussed as part of an overall tax system, dominated by income and commodity taxation.We show that a crucial factor in designing the tax structure is the motive underlying wealth accumulation and transfers.
    Keywords: wealth taxation, inheritance taxation, capital income taxation
    Date: 2010–05–01
  4. By: Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Violeta Vulovic (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Yongzheng Liu (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: The choice of the direct-indirect tax mix also is likely to have, as we review below, important consequences in other dimensions of the economy including macroeconomic stability, disparities in income distribution, and foreign direct investment flows. All those, including economic growth, will be revisited in this paper. There are several other potential effects of the choice of tax mix, including the impact on risk taking and entrepreneurship or taxpayers’ moral and voluntary tax compliance. As Atkinson (1977) points out, supposedly taxpayers may show preference for indirect taxation on the grounds that it offers them choice and some politicians may have similar preferences because indirect taxes may be perceived by the public as being less visible. None of these other possible effects will be explored further in this paper.
    Date: 2010–05–01
  5. By: Simon Halphen Boserup (Department of Economics, University of Copenhagen); Jori Veng Pinje (Department of Economics, University of Copenhagen)
    Abstract: A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in effective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency's use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model.
    JEL: D82 H26 K42
    Date: 2010–10
  6. By: Daniel R. Carroll
    Abstract: This paper examines the degree of income tax progressivity chosen through a simple majority vote in a model with savings. Households have permanent differences with respect to their labor productivity and their discount factors. The government has limited commitment to future policy, so voting is repeated every period. Because the model features mobility within the wealth distribution, the median voter is determined endogenously. In a numerical experiment, the model is initialized to the 1992 U.S. joint distribution of income and wealth as well as several statistics of the federal income tax distribution. Support for a high degree of progressivity is widespread. In the long run, households that vote for lower progressivity have high labor productivity and/or very high wealth. A movement towards greater progressivity increases aggregate capital and income, but it effects only a small decrease in long-run income and wealth inequality.
    Keywords: Income tax ; Taxation ; Income distribution ; Wealth
    Date: 2011
  7. By: Vito Tanzi
    Abstract: In this paper the focus of attention will be on the 30 countries that belong to the grouping that goes under the name of Organization for European Cooperation and Development (OECD). This international organization started as a European entity but over the years it has expanded its membership to include several countries from other continents. Its current membership includes countries from all continents with the exception of Africa.
    Date: 2010–05–01
  8. By: Emilio Albi (University of Madrid, Spain)
    Abstract: This paper reviews corporate income taxation in the context of the economic globalisation experienced in the last thirty years. Given present flows of capital and income between nations and the importance of multinational firms, due consideration can no longer be given to corporate taxation without contemplating international issues. The main purpose of this paper is to examine the current corporate tax trends derived from the changes occurred in the last three decades with a view to defining potential policy prescriptions aimed at making corporate taxation less distortionary and costly.
    Date: 2010–05–01
  9. By: Roy Bahl (Andrew Young School of Policy Studies, Georgia State University)
    Abstract: This paper is about the case for assigning taxing powers to subnational governments, and about the structure of this revenue assignment. As Musgrave (1983) put it in perhaps the seminal paper on this subject, “Who Should Tax, Where and What”? This review reconsiders the Musgrave questions after 25 years, asks whether the international trend in tax assignment is in step with what economists have prescribed, and concludes with some thoughts about the most likely future for the decentralization of tax systems.
    Date: 2010–05–01
  10. By: Stanely L. Winer (Carleton University, CESifo and ICER); Lawrence W. Kenny (University of Florida); Walter Hettich (California State University, Fullerton)
    Abstract: In this paper, we assess the contributions of current research in political economy to provide answers to these questions, while also presenting some new statistical results on the relation between tax structure and political regimes. Our discussion of the literature is selective and is empirically oriented. Our primary goal is to give a sense of some of the empirical research possibilities that lie ahead.
    Date: 2010–05–01

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