nep-pub New Economics Papers
on Public Finance
Issue of 2011‒12‒19
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. What Has Happened to Marginal Tax Rates? By Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
  2. Why Don’t We Tax the Rich? Inequality, Legislative Malapportionment, and Personal Income Taxation around the World By Martin Ardanaz; Carlos Scartascini
  3. Assessing the Variability of Tax Elasticities in Lithuania By Tigran Poghosyan
  4. From transfers to tax "co-occupation": the Italian reform of intergovernmental finance By Ernesto Longobardi
  5. Public Debt and Economic Growth in Italy By Fabrizio Balassone; Maura Francese; Angelo Pace

  1. By: Callan, Tim; Crilly, Niamh; Keane, Claire; Walsh, John R.
    Keywords: taxes
    Date: 2011–11
  2. By: Martin Ardanaz; Carlos Scartascini
    Abstract: Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political influence. Because over-represented districts tend to be dominated by parties aligned with the elite, these groups can block legislative attempts to introduce progressive taxes. Using a sample of more than 50 countries (including 17 across Latin America) between 1990 and 2007, this paper finds that i) countries with historically more unequal distributions of wealth and income systematically present higher levels of legislative malapportionment, and ii) higher levels of malapportionment are associated with lower shares of personal income taxes in GDP.
    JEL: D70 D78 H24
    Date: 2011–11
  3. By: Tigran Poghosyan
    Abstract: This paper quantifies the variability of tax elasticities in Lithuania using two alternative methods: rolling regressions and pooled mean group estimator. The analysis is motivated by the systematic variation of tax revenues observed over the economic cycle in the recent past. Both methods confirm that tax elasticities moved with the cycle, which can be attributed to the procyclical tax compliance tendencies and structural composition effects across tax bases. Comparison of VAT revenue gaps across Baltic countries during the recent recovery suggests that tax revenues rebounded fastest in Estonia, followed by Lithuania and Latvia. Overall, the results of the study emphasize the importance of accounting for cyclical variation in tax elasticities when making short-term tax revenue projections.
    Keywords: Baltics , Business cycles , Cross country analysis , Direct taxation , Estonia , Indirect taxation , Latvia , Tax revenues , Tax systems , Value added tax ,
    Date: 2011–11–17
  4. By: Ernesto Longobardi (Università di Bari)
    Abstract: The paper provides some insights into the current reform of the system of intergovernmental relations in Italy. A most relevant change is the abolition of transfers from a higher level of government as an ordinary means of finance for sub-central governments, with the exception of grants having an explicit equalisation purpose. Since the room for autonomous local taxes is quite narrow, transfers are going to be substituted, to a large extent, by different forms of "co-occupation" of central taxes. Using the OECD taxonomy about tax autonomy, it is shown that the effective increase in "infra-marginal" tax autonomy of sub-central governments brought about by the reform will be quite modest. At the margin, however, where autonomy really matters, there could be enough room for the exercise of effective discretion. The main problem is that both the central and the sub-central governments fear the decentralisation of tax power. The former because it feels that, at least in the transitional period, the electorate might not properly distinguish the different fiscal responsibilities; the latter because they would prefer not to tax their electorate, notwithstanding their preferences for more stable and predictable sources of finance with respect to the current system.
    Keywords: Intergovernmental finance, decentralisation, tax assignment, tax autonomy
    JEL: H71 H77
    Date: 2011–12
  5. By: Fabrizio Balassone (Bank of Italy); Maura Francese (Bank of Italy); Angelo Pace (Bank of Italy)
    Abstract: In this paper we investigate the link between government debt-to-GDP ratio and real per capita income growth in Italy over 1861-2009. We model our regression analysis on a standard production function. Our results support the hypotheses of a negative relation between public debt and growth and of a stronger effect of foreign debt compared to domestic debt before World War I. The effect of public debt on growth appears to work mainly through reduced investment. These results help explain the different reaction of per capita GDP growth to the debt-ratio over 1880-1914 (when the negative correlation between the two variables is particularly strong) and 1985-2007 (when the correlation appears to break down when debt starts declining). A descriptive analysis of fiscal policy in these two periods suggests that differences in the timing of fiscal consolidation as well as in the size and composition of the budget are additional explanatory factors.
    Keywords: public debt, economic growth, Italian economic history
    JEL: H63 E60 N0
    Date: 2011–10

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