nep-pub New Economics Papers
on Public Finance
Issue of 2013‒06‒09
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Paradox of Redistribution Revisited: And That It May Rest in Peace? By Marx, Ive; Salanauskaite, Lina; Verbist, Gerlinde
  2. Tax-paying for Fun and Profit By Kunstadt, Robert; Maggioni, Ilaria
  3. The Effect of Moving to a Territorial Tax System on Profit Repatriations: Evidence from Japan By HASEGAWA Makoto; KIYOTA Kozo
  4. Earned income tax credits, unemployment benefits and wages: empirical evidence from Sweden By Bennmarker, Helge; Calmfors, Lars; Larsson Seim, Anna

  1. By: Marx, Ive (University of Antwerp); Salanauskaite, Lina (University of Antwerp); Verbist, Gerlinde (University of Antwerp)
    Abstract: There is a long-standing controversy over the question of whether targeting social transfers towards the bottom part of the income distribution actually enhances or weakens their redistributive impact. Korpi and Palme have influentially claimed that "the more we target benefits at the poor, the less likely we are to reduce poverty and inequality". The basic empirical underpinning of this claim is a strong inverse relationship at the country level between social transfer targeting and redistributive impact. We show that this no longer holds as a robust empirical generalisation. The relationship between the extent of targeting and redistributive impact over a broad set of empirical specifications, country selections and data sources has in fact become a very weak one. For what it matters, targeting tends to be associated with higher levels of redistribution, especially when overall effort in terms of spending is high. We try to make substantive sense of this breakdown of the originally established relationship by focusing on two questions: first, what has changed in the countries originally included in the study and, second, what is different about the countries now additionally included in the analysis?
    Keywords: targeting, tax benefit policies, redistribution, inequality
    JEL: H1 H2 H53
    Date: 2013–05
  2. By: Kunstadt, Robert; Maggioni, Ilaria
    Abstract: Modern advances give us the ability to re-engineer the taxation system to benefit from computerized automation and the insights of modern psychology. People like to do things that bring a tangible reward. Tax-paying should be made FUN, not a chore. You will want to participate if you perceive a direct benefit. This new model selectively adapts the old English system of raising money by granting royal monopolies. A tax-paying entity would be allowed to make a bid on the percentage of tax it would pay for acquiring monopoly rights on a particular venture, posted publicly on a government-auction website for others to see and to post their alternative bids. Proposals put out for bid could immediately be tested for market viability by getting a thumbs-up/thumbs-down from the general public. The rewards to the proposer and to the public can be immediately perceived by all. Hence, the conditions for a positive stimulus-response-reward loop are fulfilled. Tax-paying becomes both fun and profitable, even more gratifying than betting in Las Vegas, because the bidder gets a perceptible benefit from it right away. The advantage to the state and its citizens is that monopoly efficiency does not just serve the monopolist but also the public. The would-be monopolist must make a precise calculation of how much to offer the state in taxes; upon pain of losing the auction to a competitor. With minimal government intervention, the “invisible hand” of economic theory is put to the task of serving the public good. (Journal of Economic Literature (JEL) Classification: H2 - Taxation, Subsidies, and Revenue; H21 - Efficiency; Optimal Taxation; H25 - Business Taxes and Subsidies; H27 - Other Sources of Revenue)
    Keywords: Revenue; Efficiency; Optimal Taxation; Business Taxes; Sources of Revenue; Monopoly; Bid; Bidding; Internet; Automation; Auction; Competition
    JEL: H2 H21 H25 H27
    Date: 2013–05–12
  3. By: HASEGAWA Makoto; KIYOTA Kozo
    Abstract: The design of international tax policies, including whether and how to tax corporate incomes earned in foreign countries, has received a great deal of attention from policymakers and economists. The United States taxes foreign source income upon repatriation under the worldwide tax system and has long discussed changing the current corporate tax system to a territorial tax system that exempts foreign income from home taxation. Japan had a worldwide tax system similar to that in the United States, but moved to a territorial tax system by introducing a foreign dividend exemption in April 2009. This paper examines the effect of dividend exemption on profit repatriations by Japanese multinationals. We find that while the dividend exemption system stimulated dividend payments by foreign affiliates on average, their responses to dividend exemption were heterogeneous. Foreign affiliates not paying dividends under the worldwide tax system did not start to do so as a result of the legislation. On the other hand, dividend exemption increased dividend repatriations by foreign affiliates that had paid dividends under the worldwide tax system. We also find that more profitable firms paid larger amounts of dividends under the worldwide tax system and increased dividend payments further in the first year of the new exemption system.
    Date: 2013–05
  4. By: Bennmarker, Helge (IFAU - Institute for Evaluation of Labour Market and Education Policy); Calmfors, Lars (Institute for International Economics Study, Stockholm University); Larsson Seim, Anna (Department of Economics, Stockholm University)
    Abstract: Although there is a large literature on employment effects of earned income tax credits (EITCs) and unemployment benefits, less is known about wage effects. In our model the impact is via the net (after-tax) replacement rate. Using a panel of individuals from Sweden, we find a positive relationship between the net replacement rate and wages with semi-elasticities in the range 0.2-0.4. This implies that a one percent reduction in the unemployment benefit level or a one percent increase in the net-of-tax rate is associated with a fall in the before-tax wage of 0.1-0.2 per cent. EITCs and unemployment benefit reductions are thus likely to induce wage moderation.
    Keywords: Earned income tax credit; unemployment benefits; wage formation
    JEL: H24 J31 J38
    Date: 2013–05–10

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