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on Public Finance |
| By: | Luc Arrondel (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); André Masson (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | There is a capital taxation puzzle in most developed countries. Since the 1960s, revenues from wealth transfer taxation have been especially low and decreasing as a percentage of GDP, even to the extent of disappearing in quite a number of cases; by contrast, lifetime wealth or capital taxation generates much higher revenues and shows no decreasing trend. The full tax puzzle is certainly not easy to explain. Many usual explanations of the aversion to wealth transfer taxation also imply limited lifetime capital taxation: they cannot justify the very strong collective preference for lifetime capital taxation observed in most countries. On the other hand, capital market imperfections may explain higher levels of lifetime capital taxation, but not the diverging trends of the two components of capital taxation. We think that a key explanatory factor of the tax puzzle in general and of the growing unpopularity of wealth transfer taxation in particular stems from the rising role of family values and links: the family appears to be the only safe investment nowadays in the face of risky globalized markets and the feared retrenchment of the welfare state. Any realistic reform must take this social and political constraint into account. Most reformist economists think that lifetime wealth or capital taxation could act as quite an efficient substitute for too unpopular taxes on wealth transfers. We offer an alternative solution which recommends heavier and more progressive taxation on family inheritances (only) while allowing for various legal loopholes to avoid the tax. It could hence prompt parents driven by family altruism to increase (early) inter vivos transfers to their progeny and people driven by social altruism to make more charitable gifts and bequests, and would bring in additional and welcome revenues. |
| Keywords: | Optimal taxation; Wealth; Inheritance |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00834189&r=pub |
| By: | Lilley, Andrew (University of Sydney); Slonim, Robert (University of Sydney) |
| Abstract: | This paper presents a model and experimental evidence to explain the "volunteering puzzle" where agents prefer volunteering time to donating money when monetary donations are, ceteris paribus, more efficient for providing resources to charity. In the model agents receive heterogeneous utility from pure and impure altruism (Andreoni 1989) that permits warm glow to vary between monetary donations and volunteering, thus allowing preferences for impure altruism to rationalize inefficient allocation decisions. We define a measure of the price of impure altruism as the additional proportion of income sacrificed by a donor to give in the dimension that maximizes her utility, holding the overall charitable contribution constant. To test the predictions of the model we ran an experiment in which we varied within-subjects the costs and benefits of monetary and volunteer donations. We also primed between-subjects the emphasis on the donation value to the charity (pure altruism) or the sacrifice to the donor (impure warm-glow altruism). Consistent with the model's predictions, the experiment shows that priming pure altruism increases the efficiency of donation choices, substitutability of donations between money and time and crowding out. Nonetheless, while greater impurity results in a more inefficient allocation of resources, empirically we find it increases overall charitable donations. We discuss the implications of our experimental results for both theory and policy. |
| Keywords: | altruism, warm glow, volunteering, monetary donations, laboratory experiments |
| JEL: | D64 D78 H41 C91 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7445&r=pub |