nep-pub New Economics Papers
on Public Finance
Issue of 2013‒08‒05
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Redistribution and Tax Evasion: an Asymmetric Information Approach By Silvia Platoni; Francesco Timpano
  2. The impact of taxation on international assignment decisions: A principal-agent approach By Martini, Jan Thomas; Niemann, Rainer
  3. Tax Me If You Can! Optimal Nonlinear Income Tax between Competing Governments By LEHMANN, Etienne; Simula, Laurent; TRANNOY, Alain
  4. Economic Growth, Tax Evasion and Tax Monitoring Expenses: An Empirical Analysis in OECD Countries By Konstantinos Chatzimichael; Pantelis Kalaitzidakis; Vangelis Tzouvelekas
  5. Should Oklahoma Be More Like Texas? A Taxing Decision By Rickman, Dan
  6. Taxing Hard-to-Tax Markets By Marcelo Arbex; Enlinson Mattos; Laudo M. Ogura
  7. Public Good Provision, Punishment and the Endowment Origin: Experimental Evidence By Armenak Antynian; Luca Corazzini; daniel.neururer
  8. How Does Women Working Affect Social Security Replacement Rates? By Alicia Munnell; April Yanyuan Wu; Nadia Karamcheva; Patrick Purcell

  1. By: Silvia Platoni (DISCE, Università Cattolica); Francesco Timpano (DISCE, Università Cattolica)
    Abstract: The article studies the optimal redistribution system, achieved by direct taxation, indirect taxation and public provision of the pseudo-necessary good, when individuals, who differ in productivity, can take hidden actions (tax evasion by moral hazard) and have hidden information (tax evasion by adverse selection). It proves that any Government willing to effectively reallocate resources among individuals has to undertake measures against tax evasion, i.e. to establish tax evasion fines.
    Keywords: Redistribution; Tax Evasion; Asymmetric Information.
    JEL: H23 H42 H26 D82
    Date: 2013–07
  2. By: Martini, Jan Thomas; Niemann, Rainer
    Abstract: In many industries like management consulting, IT consulting, or construction highly qualified employees, i.e., experts or executive managers, have to be assigned to temporary projects. In firms with many employees and various different projects, this assignment decision involves a complex optimization procedure. Obviously, the employees' productivities in the respective projects are crucial for the employer's optimal assignment decision, but assignment can also be affected by risk-incentive trade-offs. Moreover, taxation can alter the assignment decision, especially if employees are sent abroad as expatriates so that international tax law has to be taken into account. To address these issues simultaneously, we combine a human resource assignment problem with a principal-agent problem of the LEN type. Both wage taxation at the agents' level and corporate taxation at the principal's level are integrated. We show that national tax rules aswell as the methods for avoiding double taxation and the agents' tax characteristics are important determinants for international assignment decisions. The effects of tax rate variations can be ambiguous and depend on whether the exemption method or the credit method are applied, in particular if agents make differing choices of residence. From a tax policy perspective, the exemption method should be preferred because the tax effects are more transparent than under the credit method. Special deductions for incoming expatriates have only little effects on the optimal assignment decision. --
    Keywords: Assignment,Expatriates,International taxation,Principal-agent model,LEN model
    JEL: H24 H25 M41
    Date: 2013
  3. By: LEHMANN, Etienne (CRED (TEPP), Universit´e Panth´eon-Assas & CREST); Simula, Laurent (Uppsala Center for Fiscal Studies); TRANNOY, Alain (Aix-Marseille Universit´e (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: We investigate how the optimal nonlinear income tax schedule is modified when taxpayers can evade taxation by emigrating. We consider two symmetric countries with Maximin governments. Workers choose their labor supply along the intensive margin. The skill distribution is continuous, and, for each skill level, the distribution of migration cost is also continuous. We show that optimal marginal tax rates are nonnegative at the symmetric Nash equilibrium when the semi-elasticity of migration is decreasing in the skill level. When the semi-elasticity of migration is increasing in the skill level, either optimal marginal tax rates are positive everywhere or they are positive for the lower part of the skill distribution and then negative. Numerical simulations are calibrated using plausible values of the semi-elasticity of migration for top income earners. We show that the shape of optimal tax schedule varies significantly, depending on the profile of the semi-elasticity of migration over the entire skill distribution - a profile over which we lack empirical evidence.
    Keywords: Optimal Income Tax; Income Tax competition; Migration; Labor Mobility; Nash-Equilibrium Tax Schedules
    JEL: D82 H21 H87
    Date: 2013–07–24
  4. By: Konstantinos Chatzimichael (Dept of Economics, University of Crete, Greece); Pantelis Kalaitzidakis (Dept of Economics, University of Crete, Greece); Vangelis Tzouvelekas (Department of Economics, University of Crete, Greece)
    Abstract: Using Kalaitzidakis and Kalyvitis (2004) approach, we extent Roubini and Sala-i-Martin (1993) endogenous growth model to analyse empirically the relationship between economic growth, announced tax rate and tax monitoring expenses using data from OECD countries during the 1999-2007 period. Our results indicate that high announced tax rates above the elasticity of public capital and excess expenses on tax auditing as means of reducing tax evasion are not effective deepening rather recession.
    Keywords: announced tax rate, tax monitoring, tax evasion, GDP growth
    JEL: H21 H26 H54
    Date: 2013–06–29
  5. By: Rickman, Dan
    Abstract: This paper considers whether Texas should serve as the economic policy model for Oklahoma, particularly in terms of reducing or eliminating the state income tax. I compare Oklahoma’s recent economic performance to that of Texas and other adjacent states. Comparisons are made at both the state and county levels, for different time periods, and for several economic indicators. County level regression analysis, of all counties, and separately for only border counties, both explicitly and implicitly controls for potential non-policy growth influences. Overall, I conclude that there is not sufficient evidence to warrant Oklahoma emulating Texas economic policies.
    Keywords: state income tax, Oklahoma, Texas
    JEL: H30 R51 R58
    Date: 2013–07–21
  6. By: Marcelo Arbex (Department of Economics, University of Windsor); Enlinson Mattos (São Paulo School of Economics, Getulio Vargas Foundation); Laudo M. Ogura (Economics Department, Grand Valley State University)
    Abstract: Tax enforcement costs constrain the government?s ability to observe economic transactions, giving rise to hard-to-tax (HTT) markets. In these markets transactions are untaxed and consumers are better off than in taxed markets. This paper studies a novel approach to combat evasion in HTT markets: consumer auditing, which rewards consumers for requesting transaction receipts. We develop a Hotelling-type spatial model of sales taxation to analyze the welfare and distributional effects of the implementation of this policy. We find that consumer auditing allows for a lower tax rate and greater provision of the public good in the economy. We show that this policy not only can enhance welfare, but also equalize utilities of consumers across markets.
    Keywords: taxation; hard-to-tax; tax evasion.
    JEL: H1 H21 H26
    Date: 2013–08
  7. By: Armenak Antynian (University of Venice); Luca Corazzini (University of Padova); daniel.neururer (University of Innsbruck)
    Abstract: We study the interplay between contributions and costly punishment in a linear public good game in which subjects differ in the origin of their endowment: for half of the group members, obtaining the endowment is conditional on succeeding in a real effort task, while for the remaining half, it is exogenously granted. Compared to a benchmark treatment with no real effort task, we find no differences in contributions. However, we detect significant differences in punishment between treatments, with subjects in the benchmark being more inclined to punish non-cooperative behaviors. Moreover, in the treatment with heterogeneity of endowment sources, we find that subjects exerting real effort to earn their endowments assign fewer punishing points than those receiving a windfall endowments.
    Keywords: Endowment Origin, Linear Public Good Game, Punishment. JEL: D63, H41, C91, C92.
    Date: 2013–07
  8. By: Alicia Munnell; April Yanyuan Wu; Nadia Karamcheva; Patrick Purcell
    Abstract: The Social Security Trustees Report states that replacement rates for the medium earner rose from about 30 percent in the 1970s to 40 percent in the 1980s, where they remain today. However, the focus on individual earners is often misleading as many people work and retire as part of a married couple, making the household a more appropriate unit of analysis. And replacement rates for households depend on more than Social Security provisions; they also depend on the labor force activity of each spouse. These dimensions have been changing dramatically with the increased labor force participation of women. This brief reports on a recent study that explores how the changing lives of women affect Social Security replacement rates for households across seven cohorts: Depression Era 1 (born 1931-35), Depression Era 2 (1936-41), War Baby (1942-47), Early Baby Boomers (1948-53), Middle Baby Boomers (1954-59), Late Baby Boomers (1960-65), and Generation Xers (1966-75). The analysis uses Modeling Income in the Near Term (MINT), a microsimulation model developed by the Social Security Administration (SSA). The discussion proceeds as follows. The first section describes how Social Security benefits and replacement rates are determined. The second section highlights the changing work force activity of women. The third section summarizes the trends in replacement rates across cohorts, focusing on married households. The fourth section decomposes the decline in replacement rates over the seven cohorts to compare the changing role of women with other factors, such as claiming behavior. The final section concludes that the changing role of women has led to a marked decline in replacement rates that will continue for future retirees.
    Date: 2013–07

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