nep-pub New Economics Papers
on Public Finance
Issue of 2012‒04‒17
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxing home ownership: distributional effects of including net imputed rent in taxable income By Francesco Figari; Alari Paulus; Holly Sutherland; Panos Tsakloglou; Gerlinde Verbist; Francesca Zantomio
  2. Designing Intergovernmental Transfers in Russia: A Simulation Study By Tao Zhang; Heng-fu Zou
  3. Social Security Reforms in Northern Cyprus: Are they Fiscally Balanced and Socially Equitable? By Hasan U. Altiok; Glenn Jenkins
  4. Old-age provisions in the United States: Changes in the retirement system since the 1980s By Grell, Britta
  5. Old-age provisions in Germany: Changes in the retirement system since the 1980s By Wörz, Markus

  1. By: Francesco Figari (University of Essex & University of Insubria); Alari Paulus (University of Essex); Holly Sutherland (University of Essex); Panos Tsakloglou (Athens University of Economics and Business); Gerlinde Verbist (University of Antwerp); Francesca Zantomio (Ca� Foscari University of Venice)
    Abstract: Imputed rental income of homeowners is tax exempt in most countries, despite the long-standing arguments recommending its inclusion in the tax base, on both equity and efficiency grounds. The current fiscal crisis revived interest towards this form of taxation. The paper investigates the fiscal and distributional consequences of including homeowners� imputed rent, net of mortgage interest and maintenance costs, in taxable income as any cash income source that extends consumption opportunities. Three scenarios are analysed in six European countries: in the first imputed rent is included in the taxable income of homeowners, while at the same time existing mortgage interest tax relief schemes and taxation of cadastral incomes are abolished. In two further revenue-neutral scenarios, the additional tax revenue raised through the taxation of imputed rent is redistributed to taxpayers, either through a proportional rebate or a lump-sum tax credit. Results show how including net imputed rent in the tax base might affect inequality in each of the countries considered. Housing taxation appears to be a promising avenue for raising additional revenues, or lightening taxation of labour, with no inequality-increasing side-effects.
    Keywords: Housing taxation; imputed rent; income distribution; inequality; microsimulation
    JEL: D31 H23 I31 I32
    Date: 2012–04–08
  2. By: Tao Zhang (Public Economics Division, Policy Research Department, The World Bank); Heng-fu Zou (Public Economics Division, Policy Research Department, The World Bank)
    Date: 2012
  3. By: Hasan U. Altiok (Eastern Mediterranean University, Cyprus); Glenn Jenkins (Queen's University, Canada and Eastern Mediterranean University, Cyprus)
    Abstract: This paper contains a quantitative assessment of the social security pension reforms in Northern Cyprus (TRNC) that were introduced in 2008 and later refined in 2012. A set of estimations are carried out to determine if the reforms were adequate enough to make the system self-financing. The key question is whether now the contributions over a participants working life would be sufficient to finance the pension promises through retirement. It is found that although significant improvements were made, the new system is neither fiscally neutral nor socially equitable. It delivers a higher budgetary subsidy to high income participants relative to the subsidy received by those with lower incomes. Recommendations are made for the policy changes to correct these defects.
    Keywords: pay-as-you-go, social security, pension liabilities, replacement rate, Northern Cyprus
    JEL: H55 H68
    Date: 2012–01
  4. By: Grell, Britta
    Abstract: When policy discussions turn to income provisions for the old-aged, the focus is often on Social Security programs and the long-term solvency of national public pension systems. While Social Security remains the most important income source for the non-working elderly in the United States, Americans have a much longer tradition of relying on occupational and individual pensions as a crucial part of their retirement income. The paper gives an account of relevant social and legal provisions with implications for voluntary and involuntary retirement, and documents how statutory changes during the past three decades have affected the financial well-being of current and future retirees. It concludes that growing risks in old age are less due to declining Social Security benefits than to several trends in the private industry and financial markets that have seriously weakened employmentbased, old-age protection. In terms of institutional changes, however, the United States has not seen any fundamental restructuring of its public pension system since the 1980s. --
    Date: 2011
  5. By: Wörz, Markus
    Abstract: Pensions absorb the largest share of the welfare state in financial terms. This is true not only in the aggregate but also for individuals. Financial security in old age is of key importance. The provision of financial security, however, is contingent upon the institutional arrangement of social security systems. This paper describes key features of Statutory Pension Insurance (SPI), the most important provision for financial security in old age from which most senior citizens derive the largest part of their retirement income. It focuses next on core SPI features: How benefits are calculated; important changes since the 1980s; and, how these changes affect average pensions. With various routes into retirement - particularly in Germany - the following chapter then discusses these different paths and how they were reformed over time. Following that, occupational and private pensions are examined as alternative means to oldage financial security other than SPI. Here we do so with empirical data showing the evolution of different, old-age income sources since the 1990s. This institutional description shows that SPI became less generous between 1980 and 2007: First, the pension formula has been modified several times resulting in shrinking benefits. The introduction of actuarial reductions, in 1997, for early enrolment of benefits amplified this, since a considerable number of people retire before the statutory retirement age and, therefore, receive lower pensions. Moreover, in several steps, university education has been completely disregarded in the valuation of pensions. At the same time, credits were given for child-raising and child-care services. Whereas the former is already in force, the latter will only benefit future generations of pensioners. Thus, those most affected by welfare state changes in relation to old-age pensions are pensioners who retire early and have higher education. --
    Date: 2011

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