nep-pub New Economics Papers
on Public Finance
Issue of 2012‒07‒23
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Do Income Taxes Affect the Progressivity of Social Security? By Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
  2. Business taxation and wages: evidence from individual panel data By Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers
  3. The effects of different types of taxes on soft-drink consumption By Abdulfatah Sheikhbihi Adam; Sinne Smed
  4. Local taxes in Buenos Aires City: A CGE approach By Chisari, Omar Osvaldo; Mastronardi, Leonardo Javier; Romero, Carlos Adrián
  5. Taxing Hotel Room Sales by Online Travel Companies: What Should Be the Appropriate Tax Base? By James Mak
  6. Public debt ratio and its determinants in France since 1890 Does econometrics supports the historical evidence? By Dufrénot, G.; Triki, K.
  7. Public Finance and its Legal Framework: Toward a Legal Framework to Ensure Fiscal Consolidation and Fiscal Policy Management By Kazuyuki Sugimoto

  1. By: Norma B. Coe; Zhenya Karamcheva; Richard Kopcke; Alicia H. Munnell
    Abstract: Policymakers have designed Social Security to be a progressive retirement program that replaces a larger share of monthly earnings for low- and middle-income workers than for high earners. However, previous research has found that, although the Disability Insurance (DI) component of Social Security is very progressive, the Old-Age and Survivors Insurance (OASI) component may be less progressive than intended. One reason is that high earners tend to live longer than low earners. Since Social Security pays an annuity that lasts throughout retirement, it benefits high earners with greater longevity. Social Security’s progressivity may also be affected by federal income taxes paid by workers and retirees, but research to date has largely ignored this effect. This brief uses data on households from the Health and Retirement Study to examine the interaction between income taxes and Social Security contributions and benefits. The discussion proceeds as follows. The first section describes factors that could affect the progressivity of the OASI component of Social Security. The second section introduces three ways in which the income tax system could impact progressivity: the treatment of employer contributions to Social Security; the Earned Income Tax Credit; and the taxation of Social Security benefits. The third section describes the data and methodology used to analyze households in three birth cohorts and presents the before- and after-tax re­sults for the oldest cohort. The fourth section extends the analysis to the two later cohorts to assess whether the role of taxes changes over time. The conclusion is that the net impact of taxes on progressivity is modest, as large effects from the separate tax provi­sions mainly offset one another. Over time, however, the net impact of taxes appears to be growing more progressive as an increasing number of retirees are required to pay income taxes on their benefits under current law.
    Date: 2012–01
  2. By: Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers
    Abstract: Empirical evidence on the degree of business-tax shifting to employees via the wage level is highly controversial and rare. It remains open to which extent the tax burden is shifted, whether there are differences for tax increases and decreases, or whether there exists some treatment heterogeneity, that drive the respective results. Using a large administrative panel data set, we exploit the regional variation of the German business income taxation to address these issues. Our results suggest an elasticity of wages with respect to business taxes that ranges between -0.28 to -0.46, once we control for invariant unobserved regional and individual characteristics. Workers with low bargaining power, e.g., low-skilled, are affected most from business tax shifting, indicating that business-tax incidence involves distributional effects. Finally, we find evidence for an asymmetric tax incidence.
    Keywords: tax incidence, profit taxation, wages, asymmetric effects
    JEL: H22 H25 J31 J38
    Date: 2012
  3. By: Abdulfatah Sheikhbihi Adam (Institute of Food and Resource Economics, University of Copenhagen); Sinne Smed (Institute of Food and Resource Economics, University of Copenhagen)
    Abstract: Monthly data from GfK Consumerscan Scandinavia for the years 2006 – 2009 are used to estimate the effects of different tax scenarios on the consumption of sugar sweetened beverages (SSB’s). Most studies fail to consider demand interrelationships between different types of soft-drinks when the effects of taxation are evaluated. To add to the literature in this aspect we estimated a two-step censored dynamic almost ideal demand system where we include the possibilities that consumers have to substitute between diet and regular soft-drinks, between discount and non-discount (normal) brands as well as between different container sizes. Especially the large sizes and discount brands provide considerable value for money to the consumer. Three different type of taxes is considered; a tax based on the content of added sugar in various SSB’s, a flat tax on soft-drinks alone and a size differentiated tax on soft-drinks that remove the value for money obtained by purchasing large container sizes. The scenarios are scaled equally in terms of obtained public revenue. Largest effect in terms of reduced intake of calories and sugar are obtained by applying the tax on sugar in all beverages, even though detrimental health effects in terms of increased intake of diet soft-drinks has to be considered. A flat tax on soft-drinks decrease the intake of sugar, but leave total calorie intake unaltered due to substitution with other SSB’s. A tax aimed at removing the value added from purchasing large container sizes increase sugar and total calorie intake due to substitution towards discount brands. Hence the results show the importance of considering substitution between different sizes, brands and discount versus normal brands when simulating the effects of soft-drinks taxation and point toward a tax on the sugar content of SSB’s as the most effective in the regulation of obesity.
    Keywords: Soft-drinks consumption, taxation, consumer behaviour, two-step censoring
    Date: 2012–07
  4. By: Chisari, Omar Osvaldo; Mastronardi, Leonardo Javier; Romero, Carlos Adrián
    Abstract: The aim of this paper is to analyze the spillover effects of national and local tax policies using a static bi-regional general equilibrium model for the Buenos Aires City (BAC) and the rest of Argentina. The BAC represents 7% of the population of the country, but 29% of its GDP. We analyze the reciprocal impact of fiscal policies on welfare of private agents and the spillover effects on the performance of the public sector of both regions. As expected, the model shows that national fiscal policies do have relevant effects on the activity level of the city and on the welfare of its inhabitants. However, more unexpectedly, it also shows that fiscal decisions at the level of the city have a significant impact on the rest of the country. The results show that: (i) an increase in BAC local taxes produce a decline in the welfare of households and in the activity levels, in both regions; (ii) an increase in national value added tax decreases the regional GDP in both regions, but in different proportions, and increases the regional unemployment rate. The results differ depending on the type of tax (sales or property). Production elasticities and the rule of indexation of wages are key factors that affect the quantitative and qualitative results.
    Keywords: Fiscal Federalism; Computable general equilibrium; Regional spillover effects
    JEL: H77 C68 D58
    Date: 2012–04–30
  5. By: James Mak (UHERO, University of Hawaii at Manoa)
    Abstract: This essay examines the current dispute between state and local governments in the U.S. and online travel companies (OTCs) over the appropriate hotel occupancy tax base for online hotel bookings. It addresses the question of what should be the appropriate tax base in designing hotel occupancy tax statutes. It argues that the appropriate tax base should be the full rental prices of the hotel rooms paid by consumers inclusive of online travel company markups and service fees and not the discounted net rates paid by the OTCs to their hotel suppliers.
    Keywords: Hotel Occupancy Tax, Online Travel Companies, Merchant Model
    JEL: Q20 Q25
    Date: 2012–07
  6. By: Dufrénot, G.; Triki, K.
    Abstract: Can the evolution of public debt be predicted from its determinants? While the recovery programs undertaken during the 2008 crisis have led to a big takeoff in public debt ratios, the factors likely to curb its upward spiraling dynamic are subject to considerable uncertainty and fuel debate among economists. Are budgetary consolidations alone sufficient? Is there a need to return to inflationary policies, or is strong economic growth the essential factor to bring about a drop in the public debt ratio? The present paper proposes a long term retrospective study of the French case. A model of advanced indicators for the debt ratio is proposed whose results are interpreted in the light of the historical context. It is shown that from the end of the 19th century to the beginning of the 1950s, growth, inflation and primary balances were factors capable of explaining the alternation between upward and downward phases in the debt ratio. Then, during the three decades of the post-war boom, very high inflation and economic growth masked nascent budgetary imbalances while the so-called “stop and go” policies were privileged. The 1980s marked a break in the sense that growth and improvement in the primary balances no longer allowed the upward dynamics of the debt ratio to be reversed.
    Keywords: Public debt, debt ratio, advanced indicators, economic history, forewarning indicator.
    JEL: H54 C4
    Date: 2012
  7. By: Kazuyuki Sugimoto (Chairman of Mizuho Research Institute Ltd. Former Professor, Graduate School of Public Policy, University of Tokyo)
    Abstract: Public finance in Japan faces challenges more serious than ever before. One of the most compelling and urgent goals is to ensure public finance discipline. This paper focuses on a framework and measures to ensure public finance discipline.
    Date: 2012–06

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