nep-pub New Economics Papers
on Public Finance
Issue of 2013‒09‒25
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Marginal Taxation of Labor Income in Sweden from 1862 to 2010 By Du Rietz, Gunnar; Johansson, Dan; Stenkula, Mikael
  2. The sustainability of the Italian public finances: an overview By Salustri, Andrea

  1. By: Du Rietz, Gunnar (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper presents annual Swedish time series data on the top marginal tax wedge and marginal tax wedges on labor for a low, average and high income earner for the period 1862 to 2010. We identify four distinct periods separated by major tax reforms. The tax system can be depicted as proportional, with low tax wedges until World War II. Next follows a period featuring increasing tax wedges beginning in connection with World War II. During the third period, starting with the 1971 tax reform and continuing throughout the 1980s, the efforts to redistribute income culminated and tax wedges peaked. The high income earner started to pay the top marginal tax wedge which could be 90 percent. The main explanations for this development are temporary crises leading to permanent tax increases, expansion of the public sector and distributional ambitions, bracket-creep and the introduction of social security contributions paid by the employers. The 1990–1991 tax reform represents the beginning of a new and still continuing period with decreasing marginal tax wedges.
    Keywords: Labor taxation; Marginal tax rate; Marginal tax wedge; Tax reforms
    JEL: H21 H31 N44
    Date: 2013–09–19
  2. By: Salustri, Andrea
    Abstract: The Italian international reputation in mainly related to the high level of its public debt. During the Great Recession, this fact, associated to the stagnation of productivity, raised serious doubts on its economic and financial sustainability. The doubts are legitimated also by the fact that Italy is a net borrower of capitals from abroad, as its Net International Investment Position (NIIP) is negative. The statistical analysis of the Italian public finances suggests how the deep causes of the Italian financial and economic fragility rest in the malfunctioning of the institutional (public and private) and economic framework. The Italian economy should manage its structural weaknesses: i) by maturing a long term view able to involve the capital stocks in the economic reasoning; ii) by enabling SME and citizens’ participation in all the economic activities; by empowering the third sector and more in general non profit activities in order to facilitate the formation of social capital.
    Keywords: Debt-GDP ratio, spending review, economic inclusion
    JEL: H50 H63 H72
    Date: 2013–09–10

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