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on Public Finance |
| By: | Godar, Sarah; Paetz, Christoph; Truger, Achim |
| Keywords: | tax reform, taxation, trend, OECD countries, réforme fiscale, fiscalité, tendance, pays de l'OCDE, reforma tributaria, tributación, tendencia, países de la OCDE |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ilo:ilowps:485510&r=pub |
| By: | Elinder, Mikael (Uppsala Center for Fiscal Studies); Persson, Lovisa (Uppsala Center for Fiscal Studies) |
| Abstract: | In 2008, the Swedish property tax was reformed and a cap on yearly tax liabilities was introduced. A large fraction of owner occupied houses was subject to a substantial decrease in the tax. When the reform was announced, most analysts projected - in line with tax capitalization theory - that the tax decrease would lead to significant increases in house prices. We estimate price responses and capitalization degrees, using various DID strategies, in which the price dynamics of houses that were subject to a generous tax reduction are compared to the price dynamics of houses with a more modest reduction. Our results are largely inconsistent with capitalization theory. For the majority of properties, we find no evidence that the tax cut led to increases in house prices. However, we nd evidence of partial capitalization in sub-markets with highly valued properties, highly educated citizens and were it is especially dicult to increase supply. We argue that theories of bounded rationality can help explain why house buyers may fail to take a tax decrease into account in the valuation of houses. |
| Keywords: | announcement effects; capitalization; financial literacy; housing market; inattention; saliency |
| JEL: | D01 D03 D04 D12 H22 H24 R21 R38 |
| Date: | 2014–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2014_006&r=pub |
| By: | Jonathan Portes |
| Abstract: | Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debt should act as a shock absorber, and any planned adjustments in debt should be gradual. This suggests that operational targets for governments (e.g. for 5 years ahead) should involve deficits rather than debt, because such rules will be more robust to shocks. Beyond that, fiscal rules need to reflect the constraints on monetary policy, and the extent to which governments are subject to deficit bias. Fiscal rules for countries in a monetary union or fixed exchange rate regime need to include a strong countercyclical element. Fiscal rules should also contain a ‘knock out’ if interest rates hit the zero lower bound: in that case the fiscal and monetary authorities should cooperate to formulate a fiscal expansion package that allows interest rates to rise above this bound. In more normal times, the design of fiscal policy rules is likely to depend on the extent to which governments are subject to deficit bias, and the effectiveness of any national fiscal council. For example, governments that had not shown a history of deficit bias could aim to target deficits five years ahead (rolling targets), and these would not require cyclical adjustment. In contrast, governments that were more prone to bias could target a cyclically adjusted deficit at the end of their expected period of office. In both cases fiscal councils would have an important role to play, in ensuring plans were implemented in the first case and allowing for departures from target when external shocks occurred in the second. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11865&r=pub |