nep-pub New Economics Papers
on Public Finance
Issue of 2014‒03‒15
fourteen papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Distribution of Household Income and Federal Taxes, 2008 and 2009 By Congressional Budget Office
  2. Effective Marginal Tax Rates for Low- and Moderate-Income Workers By Congressional Budgete Office
  3. Micro to macro models for income distribution in the absence and in the presence of tax evasion By Maria Letizia Bertotti; Giovanni Modanese
  4. Taxing Businesses Through the Individual Income Tax By Congressional Budget Office
  5. Corporate Taxes and the Growth of the Firm By Federica Liberini
  6. Raising the Excise Tax on Cigarettes: Effects on Health and the Federal Budget By Congressional Budget Office
  7. Equilibrium Tax Rates and Income Redistribution: A Laboratory Study By Marina Agranov; Thomas R. Palfrey
  8. Tax Amnesties By Marchese, Carla
  9. Average Effective Tax Rates on Consumption for Turkey : New Data and a Comparative Analysis By Murat Ungor
  10. Health Responses to a Wealth Shock: Evidence from a Swedish Tax Reform By Erixson, Oscar
  11. The Political Economy of Publicly Provided Private Goods By Dotti, Valerio
  14. Mixed equilibria in Tullock contests By Christian Ewerhart

  1. By: Congressional Budget Office
    Abstract: The recent recession has had a substantial impact on income, the amount of taxes owed, and average tax rates. Changes in households’ before-tax income and average tax rates in 2008 and 2009 were substantial and differed markedly across the income distribution.
    Date: 2012–07–10
  2. By: Congressional Budgete Office
    Abstract: Effective marginal tax rates among low- and moderate-income workers are about 30 percent, on average, with about one-third of that rate stemming from the federal income tax, more than a third from federal payroll taxes, and the remainder from state income taxes and the phaseout of SNAP benefits (formerly known as food stamps).
    Date: 2012–11–15
  3. By: Maria Letizia Bertotti; Giovanni Modanese
    Abstract: We investigate the effect of tax evasion on the income distribution and the inequality index of a society through a kinetic model described by a set of nonlinear ordinary differential equations. The model allows to compute the global outcome of binary and multiple microscopic interactions between individuals. When evasion occurs, both individuals involved in a binary interaction take advantage of it, while the rest of the society is deprived of a part of the planned redistribution. In general, the effect of evasion on the income distribution is to decrease the population of the middle classes and increase that of the poor and rich classes. We study the dependence of the Gini index on several parameters (mainly taxation rates and evasion rates), also in the case when the evasion rate increases proportionally to a taxation rate which is perceived by citizens as unfair. Finally, we evaluate the relative probability of class advancement of individuals due to direct interactions and welfare provisions, and some typical temporal rates of convergence of the income distribution to its equilibrium state.
    Date: 2014–01
  4. By: Congressional Budget Office
    Abstract: Business activity subject to individual rather than corporate income tax has grown, reducing federal revenues but probably promoting investment. In 1980, 83 percent of firms were organized as pass-through entities—that is, businesses subject to the individual income tax—and they accounted for 14 percent of business receipts.In 2007, those shares had increased to 94 percent and 38 percent, respectively.
    Date: 2012–12–06
  5. By: Federica Liberini (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: It is desirable to reduce the number of "artificial" merger and acquisitions (MA) designed to escape from high tax jurisdictions, without discouraging domestic firms from growing into highly productive multinational corporations. This paper studies the effect of corporate taxes on the headquarter's decision to expand its extensive margins through the acquisition of pre-existing firms. A model for the investment behaviour of heterogeneous firms is built, and Corporate taxes are introduced. The model shows that higher home statutory corporate tax rates make exports relatively more expensive, making firms more likely to serve foreign demand through cross-border acquisitions. The model's predictions are tested on a dynamic random parameter probit model estimated on firm-level data. The model's predictions are confirmed by the results from the empirical investigation. The data also support the hypothesis that there are sunk costs associated with becoming a multinational corporation, and that domestic firm that overcome these costs and acquire their first foreign subsidiary are more likely to complete further acquisitions. In addition, the inability to shift profit to foreign locations makes domestic firms more sensitive to home corporate taxes, as their capacity to capture investment opportunity is negatively affected by a reduction in net tax profit.
    Keywords: Corporate Taxation, Merger and Acquisitions, Dynamic Probit Model
    JEL: C25 G34 H25 H32
    Date: 2014–03
  6. By: Congressional Budget Office
    Abstract: CBO has analyzed the impact of a hypothetical increase in the federal excise tax on cigarettes to demonstrate the complex links between policies that aim to improve health and effects on the federal budget.
    Date: 2012–06–13
  7. By: Marina Agranov; Thomas R. Palfrey
    Abstract: This paper reports results from a laboratory experiment that investigates the Meltzer-Richard model of equilibrium tax rates, inequality, and income redistribution. We also extend that model to incorporate social preferences in the form of altruism and inequality aversion. The experiment varies the amount of inequality and the collective choice procedure to determine tax rates. We report four main findings. First, higher wage inequality leads to higher tax rates. The effect is significant and large in magnitude. Second, the average implemented tax rates are almost exactly equal to the theoretical ideal tax rate of the median wage worker. Third, we do not observe any significant differences in labor supply or average implemented tax rates between a direct democracy institution and a representative democracy system where tax rates are determined by candidate competition. Fourth, we observe negligible deviations from labor supply behavior or voting behavior in the directions implied by altruism or inequality aversion.
    JEL: C92 D63 D72 H23
    Date: 2014–02
  8. By: Marchese, Carla
    Abstract: A tax amnesty can be a useful tax policy tool when exploited in exceptional circumstances. Amnesties can also be used systematically as a discriminatory mechanism to improve the efficiency or even the equity of the tax system, but only if government commitment to enforcing tax law is credible. If such credibility is lacking, amnesties may actually undermine future tax revenue by breaching the implicit, psychological contract between taxpayers and the state, thus reducing taxpayers’ internal motivation for compliance. Amnesties also have important political implications, because they can signal intertemporal inconsistency in government decision-making and may be linked to the political business cycle. Amnesties respond to externalities among states or layers of government deriving from tax and enforcement policies, and network effects in these fields can trigger waves of amnesties.
    Keywords: tax amnesty, tax evasion, tax policy
    JEL: H20 H26 K34
    Date: 2014–03
  9. By: Murat Ungor
    Abstract: [EN] Consumption taxes are the most important source of revenues used to finance public spending in Turkey, where the share of taxes on consumption (general and specific) is more than 40%. This study computes the average effective tax rates on consumption for Turkish economy and provides a glimpse of how Turkey stands in comparison with other OECD countries. We provide new estimates, in a comparative perspective, using national income accounts and tax revenue statistics. Average effective tax rates on consumption increased from around 10.5% in 1998 to around 15.5-16.5% in 2012. Turkey has one of the lowest average effective tax rates on consumption in the OECD and the calculated tax rates are very similar to those for Greece in recent years. We present an exercise and show the importance of time-variant consumption taxes to understand the changes in aggregate labor supply in Turkey. We also note that the revision to the national accounts has effects on the calculated tax rates. [TR] Turkiye’de, tuketim (genel ve ozel) uzerindeki vergiler, yuzde 40’in uzerinde bir pay ile kamu harcamalarini finanse etmek icin kullanilan vergi gelirlerinin en onemli kaynagidir. Bu calisma, milli gelir hesaplari ve vergi hasilati istatistiklerini kullanarak, Turkiye ekonomisi icin, diger OECD ulkeleri ile karsilastirmali bir bicimde, tuketim uzerindeki ortalama efektif vergi oranlarini sergilemektedir. Hesaplanan vergi oranlari kullanilarak, tuketim uzerindeki efektif vergi oranlarinin tuketim-calisma uzerine etkileri incelenmektedir. Turkiye ve diger ulkeler icin rapor edilmis olan seriler, ulke karsilastirmalarini iceren degisik calismalarda kullanilabilir.
    Date: 2014
  10. By: Erixson, Oscar (Research Institute of Industrial Economics (IFN))
    Abstract: This essay contributes in two ways to the literature on the effects of economic circumstances on health. First, it deals with reverse causality and omitted variable bias by exploiting exogenous variation in inherited wealth generated by the unexpected repeal of the Swedish inheritance tax. Second, it analyzes responses in health outcomes from administrative registers. The results show that increased wealth has limited impacts on objective adult health over a period of six years. This is in line with what has been documented previously regarding subjective health outcomes. If anything, it appears as if the wealth shock resulting from the tax reform leads people to seek care for symptoms of disease, which result in that cancer is detected and possibly treated earlier. One possible explanation for this preventive response is that good health is needed for enjoying the improved consumption prospects generated by the wealth shock.
    Keywords: Inheritances; Tax reform; Wealth shock; Objective health
    JEL: D10 H30 I10 I12 I14
    Date: 2014–02–28
  11. By: Dotti, Valerio
    Abstract: Abstract Traditional Political Economy models typically imply a strong relationship between income inequality and public intervention in redistributive policies. Empirical evidence suggests that this may hold true only for certain kinds of policies, for instance cash transfers or education, but in the case of other policies with redistributive effects such as social security and some publicly provided private goods this may not hold true. Abstract In this paper I develop a method to derive the sign of the relationship between income inequality and degree of public intervention in education in a Probabilistic Voting model in which the consumers-voters are also allowed to choose other forms of redistribution. Abstract I show that the relationship between income inequality and governmental intervention implied in the traditional literature is mainly a result of the restrictive assumptions of those models. Abstract I also show that this method can deliver sharp predictions even in presence of those non-convexities in individual preferences that are usually described as a feature induced by public provision of education in the traditional literature in Public Economics. Abstract I argue that the relationship between income inequality and public intervention in schooling is a natural and promising field in which the tool proposed can be useful for empirical purposes and that can help to better explain some patterns described in the literature about public intervention in education.
    Keywords: Keywords: Political Economy; Probabilistic models; public provision; income inequality
    JEL: H44 H52
    Date: 2014–02–27
    Date: 2014
    Date: 2014
  14. By: Christian Ewerhart
    Abstract: Any symmetric mixed-strategy equilibrium in a Tullock contest with intermediate values of the decisiveness parameter ("2
    Keywords: Tullock contest, mixed-strategy Nash equilibrium, analytical functions
    JEL: C72 D72 C16
    Date: 2014–03

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