nep-pub New Economics Papers
on Public Finance
Issue of 2011‒03‒12
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Horizontal inequity under a dual income tax system: principles and measurement By Erlend E. Bø, Peter J. Lambert, and Thor O. Thoresen
  2. Income Taxation of U.S. Households: Basic Facts By Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo
  3. Efficient redistribution policy: an analysis focused on the quality of institutions and public education By Elena Sochirca; Sandra Tavares Silva
  4. The response of labour taxation to changes in government debt By Fédéric Holm-Hadulla; Nadine Leiner-Killinger; Michal Slavík
  5. Local Interaction in Tax Evasion By Barnab s M. Garay; Andr s Simonovits; J nos T¢th

  1. By: Erlend E. Bø, Peter J. Lambert, and Thor O. Thoresen (Statistics Norway)
    Abstract: Tax systems with separate taxation of wage and capital income, also called dual income tax systems, have gained relevance through the Mirrlees Review. Obviously, such tax systems are exposed to horizontal equity (HE) failures, or horizontal inequity (HI). HE and HI have a firm grip on assessment of fair tax policies, both from an academic point of view and in general public debate. The dual income tax system of Norway was modified by the tax reform of 2006 precisely because the previous schedule failed to deliver equal tax treatment of equals. This paper discusses the meaning and measurement of HI effects of dual income tax systems, and evaluates the development of HI for Norway over the time period 2000–2008 using micro data. A copula-based identification strategy efficiently establishes a framework for evaluations of HI over time. The dual income tax system and the early announcement of its impending revision during the period under examination created measurement problems which we had to account for by defining a new income concept for the empirical strategy. As expected, we find less HI in Norway after the reform of 2006.
    Keywords: Dual income tax; Horizontal inequity; Reranking; Copula estimation
    JEL: D31 D63 H31
    Date: 2011–02
  2. By: Guner, Nezih (Universitat Autònoma de Barcelona); Kaygusuz, Remzi (Sabanci University); Ventura, Gustavo (University of Iowa)
    Abstract: We use micro data from the U.S. Internal Revenue Service to document how households' tax liabilities vary with income, marital status and the number of dependents. We report facts on the distributions of average and marginal taxes, properties of the joint distributions of taxes paid and income, and discuss how taxes are affected by marital status and the number of children. The data reveals a large dispersion in tax rates and taxes paid. Ranking households according to the average tax rates they face, those at top 1% face taxes in excess of 27.5%, while the median tax rate is about 8%. About 14.5% of married and 31.8% of unmarried households do not pay any taxes. Given the progressivity in the system, tax liabilities are more unequally distributed than income. The top 5% (1%) of households account for 54% (34.8%) of total tax liabilities, while top 5% (1%) of households have 34.8% (20.3%) of total income. We also provide parametric estimates of tax functions for use in applied work in macroeconomics and public finance.
    Keywords: taxation, tax progressivity, households
    JEL: E62 H31 J12 J22
    Date: 2011–03
  3. By: Elena Sochirca (Faculdade de Economia, Universidade do Porto); Sandra Tavares Silva (CEF.UP, Faculdade de Economia, Universidade do Porto)
    Abstract: In this work we intend to study how the quality of the institutional factor may influence the efficiency of redistribution policy specifically associated with human capital accumulation. We develop a conceptual discussion building on the importance of income redistribution for economic growth and the key role of political institutions in securing growth-enhancing redistribution policies. We introduce endogenous growth theory elements into our analysis by considering as a fundamental source of economic growth human capital accumulation, motivated by tax-financed education secured through efficient redistribution policies. We outline crucial insights on the underlying mechanisms, emphasizing however that extensive research on the subject is undoubtedly still required. In particular, we identify the main factors negatively affecting the decisive role of political institutions and, consequently, distorting efficient redistribution policy. We then define a political-economic equilibrium as a combination of intermediately strong state and efficient control-rights institutions, implying simultaneous protection from expropriation and implementation of efficient redistribution policy, conducive to sustained economic growth.
    Keywords: redistribution policy, human capital, institutions, taxation, public education, economic growth
    JEL: H23 E24 O43
    Date: 2011–03
  4. By: Fédéric Holm-Hadulla (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Nadine Leiner-Killinger (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Michal Slavík (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: This paper investigates the relationship between government debt and labour taxation for a panel of 18 EU countries over the period 1979-2008. The econometric estimates point to a statistically significant and economically relevant positive response of labour taxation to changes in the general government debt and interest expenditure-to-GDP ratios. The results are robust across a range of econometric specifications and labour tax indicators. JEL Classification: H2, H24, H63, J22.
    Keywords: Debt, labour taxes, fiscal adjustment.
    Date: 2011–03
  5. By: Barnab s M. Garay (Faculty of Information Technology - P zm ny P‚ter Catholic University); Andr s Simonovits (Institute of Economics Hungarian Academy of Sciences); J nos T¢th (Department of Analysis - Budapest University of Technology and Economics)
    Abstract: We study a model of tax evasion, where a flat-rate tax only finances the provision of public goods. Deciding on reported income, each individual takes into account that the less he reports, the higher is his private consumption but the lower is his moral satisfaction. The latter depends on his own current report and average previous reports of his neighbors. Under quite general assumptions, the steady state reported income is symmetric and the process converges to the steady state.
    Keywords: tax evasion, steady state, asymptotic stability, symmetrization, networks, monotone maps
    JEL: C62 H26
    Date: 2011–01

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