nep-pub New Economics Papers
on Public Finance
Issue of 2015‒01‒31
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Capital Taxation in the 21st Century By Alan J. Auerbach ; Kevin Hassett
  2. Optimal taxation and debt with uninsurable risks to human capital accumulation By Gottardi, Piero ; Kajii, Atsushi ; Nakajima, Tomoyuki
  3. Optimal Spatial Taxation By Nezih Guner ; Jan Eeckhout
  4. Tax reforms in EU Member States - 2014 Report By European Commission
  5. The United States Sweetener Excise Tax Policy Analysis By Lakkakula, Prithviraj
  6. Debt Bias in Corporate Taxation and the Costs of Banking Crises in the EU By Sven Langedijk ; Gaëtan Nicodème ; Andrea Pagano ; Alessandro Rossi
  7. Can Green Car Taxes Restore Efficiency? Evidence from the Japanese New Car Market By Yoshifumi Konishi Author-Name: Meng Zhao

  1. By: Alan J. Auerbach ; Kevin Hassett
    Abstract: In his influential book, Capital in the 21st Century, Thomas Piketty argues forcefully that rising wealth and wealth inequality is an inherent characteristic of capitalist economies and calls for strong policy responses, in particular a substantial wealth tax implemented globally. This paper takes issue with the facts, logic, and policy conclusions in Piketty’s book, suggesting that the factors needed to support the inexorable rise in capital’s share and concentration are lacking and that among tax policy reforms aimed at dealing with economic inequality a wealth tax finds little support either in Piketty’s own work or elsewhere in the literature.
    JEL: H21 P17
    Date: 2015–01
  2. By: Gottardi, Piero (European University Institute ); Kajii, Atsushi (Kyoto University ); Nakajima, Tomoyuki (Federal Reserve Bank of Atlanta )
    Abstract: We consider an economy where individuals face uninsurable risks to their human capital accumulation and study the problem of determining the optimal level of linear taxes on capital and labor income together with the optimal path of the debt level. We show both analytically and numerically that in the presence of such risks it is beneficial to tax both labor and capital income and to have positive government debt.
    JEL: D52 D60 D90 E20 E62 H21 O40
    Date: 2014–11–01
  3. By: Nezih Guner (Universitat Autonoma de Barcelona ); Jan Eeckhout (University College London and GSE-UPF )
    Abstract: We analyze the role of optimal income taxation across different locations. Existing federal income tax schedules have a distortionary effect and result in the misallocation of labor across cities of different size. Because of higher productivity in big cities, wages for identically skilled workers are larger than in small cities. Progressive taxation thus implies that citizens in big cities pay higher taxes than in small cities. With mobility, utility is equalized, and the taxes are reflected in equilibrium wages and house prices. We solve for the optimal level of progressiveness. We find that the optimal level is not zero, but that it is less than what is observed in the US economy. Simulating the US economy under the optimal tax schedule, we find large effects on output and population mobility. GDP increases are in the range of 2.6–8.8%, and the fraction of population in 5 largest cities grows between 1.5–4.9%. The welfare effects however are small, 0.008–0.067%. This is due to the fact that the big output gains are lost in increased costs of living.
    Date: 2014
  4. By: European Commission (European Commission )
    Abstract: The 2014 This report on Tax Reforms in EU Member States presents an overview of the reforms recently introduced by Member States in the main areas of tax policy and provides up-to-date analysis of the main challenges in each area. It also includes an indicator-based assessment, which gives an initial indication of Member States’ performance in each area
    Keywords: European Union, Taxation, European Semester, VAT, Coporpotate income tax, tax administration, tax reform
    JEL: H21 H22 H23 H25 H27 H62
    Date: 2014–10
  5. By: Lakkakula, Prithviraj
    Abstract: The United States accounts for one of the highest per-capita caloric sweetener consumption in the world. The American Heart Association recommends a maximum of around 6 to 9 teaspoons of per-capita sweetener consumption per day (equivalent to 23.8 pounds to 35.71 pounds per-capita, per year). The current US per-capita sweetener consumption is approximately 19 teaspoons/day. This high sweetener consumption is often linked to major health ailments such as obesity, Type 2 diabetes, and cardiovascular diseases. This study uses a supply and demand framework to evaluate the amount of excise tax on major sweeteners (sugar and high fructose corn syrup) sufficient to reduce excess sweetener consumption to the recommended level. Results suggest a maximum consumer tax of 12 cents per pound on both sugar and HFCS sufficient to reduce consumption to the recommended level. Also, a maximum producer tax of 25 cents per pound on sugar and 95 cents per pound on HFCS is suggested to reduce consumption to the recommended level.
    Keywords: Agricultural and Food Policy, Demand and Price Analysis, Health Economics and Policy,
    Date: 2015
  6. By: Sven Langedijk (European Commission – Joint Research Center ); Gaëtan Nicodème (European Commission ); Andrea Pagano (European Commission – Joint Research Center ); Alessandro Rossi (European Commission – Joint Research Center )
    Abstract: During the period 2008-2012, EU governments incurred substantial costs bailing out banks. As corporate income taxation (CIT) in most countries still favors debt- over equityfinancing, reducing or eliminating this debt bias would complement regulatory reforms reducing costs of financial crises. To estimate this effect, we use a two-step approach. First, using panel regressions on a dataset of 32,833 bank-year observations we find sizable long-run effects of CIT on leverage in the EU. Second, we simulate the effect of tax reforms on bank losses using a Vasicek-based model with actual banks’ balance sheets to estimate costs of systemic crises for six large EU member states. Even if the tax elasticity of bank leverage is taken at the lower end of the ranges found in recent literature, eliminating the debt bias could lead to reductions of public finance losses in the range of 60 to 90%. The results hold even when considering much smaller effects for banks that are close to the regulatory minimum capital requirement of the Basel III framework. Even when asset portfolio risk is allowed to increase endogenously and considering conservative ranges of the parameter space, we conclude that tax reforms to remove the debt bias can result in very sizable reductions in risks and costs of financial crises.
    Keywords: Debt bias; Systemic crisis; Capital structure; Taxation; Allowance for Corporate Equity; Public finance; Bail out
    JEL: G01 G28 G32 H25
    Date: 2014–10
  7. By: Yoshifumi Konishi Author-Name: Meng Zhao
    Abstract: We investigate the efficiency of vehicle taxation in second-best settings. A random-coefficients logit model is estimated for quarterly automobile sales data between 2004 and 2012 from the Japanese new car market. The quasi-experimental nature of the data is exploited in two ways. First, we construct the location of product-specific tax rates in the characteristics space as a set of instruments to control for endogeneity of observed car prices. Second, the large and persistent variation in effective vehicle prices, caused due to Japan's green car tax policy since 2009, are used to obtain consistent estimates of the own- and cross-price elasticities. Our results indicate evidence for substantial scale and composition effects: Though the policy successfully reduced sales-weighted average emissions, it also increased total sales substantially. Consequently, the policy-induced reduction in annual vehicle CO2 emissions was small. In contrast, a modified version of the emissions-based vehicle tax ¨¤ la Fullterton and West (2002), based on the fuel efficiencies of car models, could have reduced annual vehicle CO2 emissions substantially more while increasing total economic surplus relative to the no policy counterfactual.

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