nep-pub New Economics Papers
on Public Finance
Issue of 2012‒09‒16
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The impact of tax exclusive and inclusive prices on demand By Naomi E. Feldman; Bradley J. Ruffle
  2. Effective tax rates and measures of business size By Kevin B. Moore
  3. A Model of Tradeable Capital Tax Permits By Timothy P. Hubbard; Justin Svec
  4. Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries By Richard Kneller; Danny McGowan
  5. The fiscal multiplier in a time of massive public Debt : the euro area Case By Radu Vranceanu; Damien Besancenot

  1. By: Naomi E. Feldman; Bradley J. Ruffle
    Abstract: We test the equivalence of tax-inclusive and tax-exclusive prices through a series of experiments that differ only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more when faced with tax-exclusive prices. This treatment effect is robust to different price levels, to initial shopping-cart purchases and persists throughout most of the ten rounds. A goods-level analysis, intra-round revisions as well as results from a third tax-deduction treatment all cast doubt on salience as the source of our findings.
    Date: 2012
  2. By: Kevin B. Moore
    Abstract: This paper uses data from the Survey of Consumer Finances (SCF) and the NBER TAXSIM model to estimate marginal and average tax rates for households that own businesses that are pass-thru entities. We examine how marginal and average tax rates vary by the size of business using four different measures of the size: net income, gross receipts, business value, and number of employees. The analysis also uses the long-time series of SCF cross-sections to examine how tax rates for business owners have evolved over the various changes in tax policy of the last two decades.
    Date: 2012
  3. By: Timothy P. Hubbard (Department of Economics, Colby College); Justin Svec (Department of Economics, College of the Holy Cross)
    Abstract: Standard models of horizontal strategic capital tax competition predict that, in a Nash equilibrium, tax rates are inefficiently low due to externalities - capital infl ow to one state corresponds to capital out ow for another state. Researchers often suggest that the federal government impose Pigouvian taxes to correct for these effects and achieve efficiency. We propose an alternative incentive-based regulation: tradeable capital tax permits. Under this system, the federal government would require a state to hold a permit if it wanted to reduce its capital income tax rate from some pre-determined benchmark. These permits would be tradeable across states. We show that, if the federal government sets the correct number of total permits, then social efficiency is achieved. We discuss the advantages of this system relative to the canonical suggestion of Pigouvian taxes.
    Keywords: tax competition; marketable permits; asymmetric states
    JEL: H25 H42 H70
    Date: 2012–09
  4. By: Richard Kneller (University of Nottingham); Danny McGowan (Bangor Business School)
    Abstract: In this paper we study the effects of reforms to corporate and personal income taxation on the rate of firm entry and exit using industry data for 19 OECD countries from 1998 to 2005. Using a difference-in-differences approach to correct for endogeneity bias we find that increases in corporate taxation affect entry but not exit. The effects of personal taxation depend upon the marginal tax rate that is altered. Increases in marginal tax rates applied at low income levels negatively affect entry and positively affect exit, whereas marginal tax reforms at higher income levels have the opposite effect.
    Keywords: income taxation; firm entry; firm exit; difference in differences
    JEL: D22 H2 H32 L26
    Date: 2012–04
  5. By: Radu Vranceanu (Economics Department - ESSEC Business School); Damien Besancenot (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234)
    Abstract: This paper argues that in Euro-area economies, where the ECB cannot bail-out …nancially distressed governments, the …scal multiplier is adversely affected by the amount of public debt. A regression model on a panel of 26 EU countries over the last 16 years shows that a 10 percentage point increase in the debt- to-GDP ratio is connected to a slowdown in annual growth rates of 0.28 percentage point. Furthermore, the effectiveness of …scal spending is adversely affected by the amount of public debt.
    Keywords: Fiscal multiplier; Euro-area; Public debt; Illiquidity; the Great Recession
    Date: 2012–08–05

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