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on Public Finance |
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Issue of 2011‒04‒30
four papers chosen by |
| By: | Bruno S. Frey |
| Abstract: | Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical "Tullock Challenges". The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general "What is important, will be manipulated by the government". To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms. |
| Keywords: | Happiness, social networks, constitutional economics, random mechanisms, public choice |
| JEL: | D72 H10 I31 P16 D02 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2011-12&r=pub |
| By: | Tonin, Mirco (University of Southampton) |
| Abstract: | This paper examines the interaction between minimum wage legislation and tax evasion by employed labor. I develop a model in which firms and workers may agree to report less than the true amount of earnings to the fiscal authorities. I show that introducing a minimum wage creates a spike in the distribution of declared earnings and induces higher compliance by some agents, thus reducing their disposable income. The comparison of food consumption and of the consumption-income gap before and after the massive minimum wage hike that took place in Hungary in 2001 reveals that households who appeared to benefit from the hike actually experienced a drop compared to similar but unaffected households, thus supporting the prediction of the theory. |
| Keywords: | minimum wage, tax evasion, spike, Hungary |
| JEL: | J38 H24 H26 H32 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5660&r=pub |
| By: | Gary Clyde Hufbauer (Peterson Institute for International Economics); Woan Foong Wong (Peterson Institute for International Economics) |
| Abstract: | The US budget outlook has the makings of a fiscal disaster, but it is the beginning of economic challenges, not the end. Among other challenges, a tax system that discourages business and erodes American competitiveness ranks high. The United States lags well behind other advanced countries, not to mention China, in reforming its corporate tax regime. Instead, over past decades, the United States has sought to make up through a high statutory tax rate, especially on multinational corporations (MNCs), what has been lost though a host of exemptions, deductions, and credits. The combination of a high corporate tax rate and its worldwide reach makes the United States—despite all its positive attributes—one of the least favored locations from the standpoint of business taxation. Unlike all other major economies, which limit corporate taxation to income earned with the national boundaries (territorial taxation), the United States hobbles its MNCs by taxing their worldwide income. Hufbauer and Wong caution that solutions to the looming fiscal crisis could make a bad corporate tax system even worse. To forestall this outcome, they advocate four measures: (1) meaningful caps on the growth of entitlement spending (Medicare, Medicaid and Social Security); (2) a national consumption tax to narrow the federal budget deficit to around 2.2 percent of GDP and to arrest the rise of public debt at about 88 percent of GDP; (3) a deep cut in the statutory corporate tax rate to 20 percent or lower, coupled with the elimination of exemptions, deductions and credits so as to broaden the tax base; and (4) the explicit adoption of a territorial system for taxing business income. The authors recognize that a national consumption tax is deeply unpopular with many Americans. However, the United States remains the only OECD country (and one of the very few countries in the world) that has not implemented a national consumption tax to fund its ambitious social programs and military commitments. Unless these programs and commitments can be downsized to a degree seldom seen in history, circumstances may compel the United States to choose between a competitive economy and a national consumption tax. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb11-2&r=pub |
| By: | Ernst, Christof; Spengel, Christoph |
| Abstract: | The focus of this paper is on effects from tax incentives for research and development inputs (R&D) and corporate income tax on business R&D and patenting behaviour. First, we provide a theoretical discussion of tax planning with R&D and intellectual property (IP) ownership. Further, we employ firm-specific micro-data on patent applications of European corporations at the European Patent Office to test reactions on changes in R&D tax incentives and corporate tax burden. We find a positive impact of R&D tax incentives and a negative impact of the statutory corporate income tax rate on patenting. R&D incentives rather influence the tendency to invest in R&D, whereas the tax burden rather influences the scale of R&D investment and the count of patent applications. -- |
| Keywords: | Patent,R&D,Tax Incentives,Taxation,EU |
| JEL: | H25 H26 O30 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11024&r=pub |