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on Public Finance |
| By: | Polito, Vito (Cardiff Business School) |
| Abstract: | The accounting and economic literature have long highlighted the potential implications of deferred taxation for tax policy analysis. This paper incorporates deferred taxation into the neoclassical investment model for the computation of the Effective Tax Rate (ETR) on business investment and revisits the empirical evidence on the evolution of ETRs in the United States over the last decade. The numerical results show that after including deferred taxation there is little differential in the ETRs across assets; ETRs in the 2000s have been essentially in line with statutory rates; and partial expensing had little effect on ETRs. These results hold whether investment is financed by equity or debt; profits are distributed to individual shareholders through dividends, interests or capital gains; and regardless of the differential between book and economic depreciation. |
| Keywords: | Deferred taxation; effective marginal tax rates; taxation of income from capital |
| JEL: | H3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/14&r=pub |
| By: | Polito, Vito (Cardiff Business School) |
| Abstract: | Empirical evidence suggests that the Effective Marginal Tax Rate (EMTR) on income from capital has increased considerably in both the United States and the United Kingdom over the period 1982-2005. This evidence contradicts the corporate tax literature which predicts that the EMTR should instead fall over time as a result of increasing international capital mobility and higher tax competition between governments. This paper argues that this inconsistency is entirely due to the fact that EMTRs on income from capital are currently computed from versions of the neoclassical investment model which do not take into account financial constraints on dividend policy faced by firms investing in both the United States and the United Kingdom. The paper incorporates financial constraints on dividend policy into the analytical framework for the computation of the EMTR and employs the new model to re-calculate time series of the EMTRs in both countries. The new empirical results show that, in contrast to the existing evidence, the EMTR on investment financed by either retained earnings or new equity has indeed declined over time in both countries, while the EMTR on debt-financed investment has remained relatively stable. |
| Keywords: | Capital income taxation; dividend policy; effective marginal tax rates; financial constraints |
| JEL: | H3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2011/13&r=pub |
| By: | Finke, Katharina; Heckemeyer, Jost H.; Reister, Timo; Spengel, Christoph |
| Abstract: | The German corporate tax reform of 2008 has brought about important cuts in corporate tax rates, which were at the same time accompanied by significant changes in the determination of the tax base for both major German corporate taxes - corporate income tax and trade tax. The reform followed the distinct and internationally prevalent pattern of tax rate cut cum base broadening. Its implications are thus not unique to Germany. Especially in view of the current economic crisis, questions on the distribution of the tax burden among firms of different characteristics have arisen and still remain at the heart of the academic and political debate in Germany and other countries. In this paper we present a new corporate microsimulation model, ZEW TaxCoMM, which allows for the coherent micro-based analysis of revenue implications of tax reforms and the distribution of tax consequences among heterogeneous firms. The model processes firm-level financial accounting input data and derives the firm specific tax base and tax due endogenously in accordance with the tax code. To smooth out distortions between the sample and the population of German corporations, the sample is extrapolated on the basis of the corporate income tax statistic. The simulation results show inter alia that the average annual relief as measured by the average decline in the effective tax burden on cash flow amounts to 2.8 percentage points for large corporations and to 6 percentage points for small corporations. Furthermore, the results illustrate that firms with low profitability, high debt ratio and high capital intensity benefit least from the reform. As to tax revenues, the reform induced decrease amounts to 9.8 billion and the trade tax gains fiscally in importance. -- |
| Keywords: | Tax reform,microsimulation,tax policy evaluation |
| JEL: | H25 H32 K34 C8 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10036r&r=pub |
| By: | Wolfgang Höchtl (University of Innsbruck); Rupert Sausgruber (University of Innsbruck); Jean-Robert Tyran (University of Vienna) |
| Abstract: | Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by self-interest. |
| Keywords: | redistribution; self interest; inequality aversion; median voter; experiment |
| JEL: | A13 C9 D72 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1118&r=pub |
| By: | Ligthart, J.E.; Oudheusden, P. van (Tilburg University, Center for Economic Research) |
| Abstract: | We measure the contribution of fiscal decentralization to trust in government. Using repeated cross-country survey data of individuals on several measures of trust in govern- ment over the 1994-2007 period, we estimate an ordered response model of the government trust and fiscal decentralization nexus. We control for unobserved country characteristics, macroeconomic determinants, and individual characteristics. Our main finding is that fiscal decentralization increases trust in government. More specifically, a one percentage point increase in fiscal decentralization causes roughly a four-fifths of a percentage point increase in government trust. The beneficial effect of fiscal decentralization on trust in government is neither limited to nor necessarily large for relatively decentralized countries. |
| Keywords: | Fiscal Decentralization;Government Trust;Social Capital |
| JEL: | D70 H11 H70 H72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011073&r=pub |
| By: | Massimo Florio (DEAS, Universit di Milano); Silvia Vignetti (CSIL Centre for Industrial Studies); Emanuela Sirtori (CSIL Centre for Industrial Studies) |
| Abstract: | This paper deals with the effects of the transfer of additional funds on the real economy of recipient countries, in particular the European Member States. The intended and unintended effects of additional funds on national public finances and, ultimately, economic performance are discussed. Understanding the real effects of additional public funds and the possible complementarity or substitutability with national public finance is important for shaping the policies for the allocation of Structural Funds. Verification of additionality plays a role in ensuring that additional funds are used to effectively complement national expenditure programmes. In the case of the European Union, it is widely recognised that the current verification mechanism is affected by weaknesses, that prevent it from providing reliable and useful data to effectively assess additionality. For this reason, the paper suggests the European Commission to move away from the current verification approach and to adopt a new one that could more effectively assess to what extent the Structural Funds complement national investments. |
| Keywords: | Public investment, substitution, displacement |
| JEL: | H5 H6 H7 O4 |
| Date: | 2011–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:mst:wpaper:201101&r=pub |