nep-pub New Economics Papers
on Public Finance
Issue of 2015‒02‒11
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pure Rent Taxation and Growth in a Two-Sector Open Economy By Alberto Petrucci
  2. Eliciting taxpayer preferences increases tax compliance By Jan-Emmanuel De Neve; Cait Lamberton; Michael I. Norton
  3. The changing role of government in financing health care: an international perspective By Mark Stabile; Sarah Thomson
  4. Voluntary Public Unemployment Insurance By Parsons, Donald O.; Tranæs, Torben; Lilleør, Helene Bie
  5. Swedish Taxation Since 1862: An Overview By Henrekson, Magnus; Stenkula, Mikael
  6. Corporate Taxation and Firm Location in Germany By Götz Zeddies
  7. The effect of taxes on corporate financing decisions: Evidence from the German interest barrier By Alberternst, Stephan; Sureth, Caren

  1. By: Alberto Petrucci (Department of Economics and Finance, LUISS Guido Carli University)
    Abstract: In this paper, the incidence of a tax on pure rent is analyzed in an OLG two-sector small open economy, in which one sector produces a capital good and one sector a consumer good. Contrary to what is obtained by Feldstein (1977) in a one-sector closed economy, a rent tax does not necessarily foster wealth accumulation and economic growth. The accommodating scheme for the government budget plays a crucial role for the effects of pure rent taxation. A rent tax stimulates nonhuman wealth if distortionary taxes on wealth or on income from nonland inputs are alleviated. The mechanism spurring capital formation is brought into action, instead, only when the rent tax is matched by a fall in capital taxation or, if the capital sector is capital intensive, by an increase in government spending on the capital good.
    Keywords: Land Rent Tax; Capital Good; Consumer Good; OLG; Wealth Accumulation.
    JEL: E62 H22 J22 O41
  2. By: Jan-Emmanuel De Neve; Cait Lamberton; Michael I. Norton
    Abstract: Two experiments show that eliciting taxpayer preferences on government spending—providing taxpayer agency--increases tax compliance. We first create an income and taxation environment in a laboratory setting to test for compliance with a lab tax. Allowing a treatment group to express nonbinding preferences over tax spending priorities, leads to a 16% increase in tax compliance. A followup online study tests this treatment with a simulation of paying US federal taxes. Allowing taxpayers to signal their preferences on the distribution of government spending, results in a 15% reduction in the stated take-up rate of a questionable tax loophole. Providing taxpayer agency recouples tax payments with the public services obtained in return, reduces general anti-tax sentiment, and holds satisfaction with tax payment stable despite increased compliance with tax dues. With tax noncompliance costing the US government $385billion annually, providing taxpayer agency could have meaningful economic impact. At the same time, giving taxpayers a voice may act as a two-way "nudge," transforming tax payment from a passive experience to a channel of communication between taxpayers and government.
    Keywords: Tax compliance; taxpayer agency; taxpayer satisfaction; government spending
    JEL: D00 H26 H30 H50 I31
    Date: 2014–05
  3. By: Mark Stabile; Sarah Thomson
    Abstract: This paper explores the changing role of government involvement in health care financing policy outside the United States. It provides a review of the economics literature in this area to elucidate the implications of recent policy changes on efficiency, costs, and quality. Our review reveals that there has been some convergence in policies adopted across countries to improve financing incentives and encourage efficient use of health services. In the case of risk pooling, all countries with competing pools experience similar difficulties with selection and are adopting more sophisticated forms of risk adjustment. In the case of hospital competition, the key drivers of success appear to be what is competed on and measurable, rather than whether the system is public or private. In the case of both the success of performance-related pay for providers and issues resulting from wait times, evidence differs within and across jurisdictions. However, the evidence does suggest that some governments have effectively reduced wait times when they have chosen explicitly to focus on achieving this goal. Many countries are exploring new ways of generating revenues for health care to enable them to cope with significant cost growth, but there is little evidence to suggest that collection mechanisms alone are effective in managing the cost or quality of care.
    JEL: H51 I11 I18
    Date: 2014–06
  4. By: Parsons, Donald O. (George Washington University); Tranæs, Torben (Rockwool Foundation Research Unit); Lilleør, Helene Bie (Rockwool Foundation Research Unit)
    Abstract: Denmark has drawn much attention for its active labor market policies, but is almost unique in offering a voluntary public unemployment insurance program requiring a significant premium payment. A safety net program – a less generous, means-tested social assistance plan – completes the system. The voluntary system emerged as one of many European "Ghent systems," essentially government subsidized trade union plans, but has since lost many key features of such plans. We assess system performance using a 10% sample of the Danish population drawn from administrative data. Coverage rates for the voluntary programs are surprisingly high, approximately 80 percent of the workforce, but the program has predictable selection effects, including adverse selection across risk classes and a substantial charity hazard (low coverage among those with generous treatment under the safety net program). The latter appears to explain the difficulty of shifting to a compulsory system; redistribution effects would be concentrated among the previously uninsured in the lowest decile of the income distribution, a problem in the Danish welfare state.
    Keywords: unemployment insurance, social assistance, early retirement
    JEL: J65 H4
    Date: 2015–01
  5. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines the development of taxation in Sweden from 1862 to 2013. The examination covers six key aspects of the Swedish tax system: the taxation of labor income, capital income, consumption, inheritance and gift, wealth and real estate. The importance of these taxes varied greatly over time and Sweden increasingly relied on broad-based taxes (such as income taxes and general consumption taxes) and taxes that were less visible to the public (such as payroll taxes and social security contributions). The tax-to-GDP ratio was initially low and relatively stable, but from the 1930s, the ratio increased sharply for 50 years. Towards the end of the period, the tax-to-GDP ratio declined significantly. The analysis is based on a project conducted at the Research Institute of Industrial Economics (IFN) and provides both a unique length and breadth of the development of a national tax system.
    Keywords: Keywords: Income tax; Wealth tax; Inheritance and gift tax; Consumption tax; Real estate tax; Tax reforms
    JEL: H20 H71 N43 N44
    Date: 2015–01–02
  6. By: Götz Zeddies
    Abstract: German Fiscal Federalism is characterized by a high degree of fiscal equalization which lowers the efficiency of local tax administration. Currently, a reform of the fiscal equalization scheme is on the political agenda. One option is to grant federal states the right to raise surtaxes on statutory tax rates set by the central government in order to reduce the equalization rate. In such an environment, especially those federal states with lower economic performance would have to raise comparatively high surtaxes. With capital mobility, this could further lower economic performance and thus tax revenues. Although statutory tax rates are so far identical across German federal states, corporate tax burden differs for several reasons. This paper tries to identify the impact of such differences on firm location. As can be shown, effective corporate taxation did seemingly not have a significant impact on firm location across German federal states.
    Keywords: fiscal equalization, corporate taxation, surtaxes, firm location
    JEL: H25 H32 H71 H77
    Date: 2015–01
  7. By: Alberternst, Stephan; Sureth, Caren
    Abstract: The theoretical literature suggests that when taking tax effects into account, debt ought to be preferable to equity. However, there are no uniform predictions of the size of this tax benefit (tax shield) in comparison to an opposing increasing cost of debt (especially insolvency costs). The vast body of empirical studies on the impact of taxation on capital structure only provides puzzling effects. We believe the German corporate tax reform in 2008, which introduced an interest barrier as a "quasiexperiment", is a promising opportunity to investigate the effects that arise from a reform of interest deductibility. We study capital structure adjustments empirically using financial statement data from German companies. We consider a study of German tax reform on the basis of German data of general interest because, first, similar tax reforms have been conducted in several countries. Second, the availability of single entity financial statements for German companies allow us to capture tax and capital structure details that have not been available in most prior studies. Third, the major characteristics of the German tax system can be regarded as representative for most European and the major Asian countries. All of this information enables us to contribute to solving the capital structure puzzle in a unique way. With significance at the 5% level, we find evidence that the companies that are affected by the interest barrier reduce their leverage by 3 percentage points more than companies that are not affected. We are the first to employ a detailed matching approach to the underlying rich dataset, which enables us to overcome some of the limitations of previous studies. While many prior empirical studies on capital structure have provided mixed results on capital structure reactions, we find robust evidence for the impact of tax reforms on corporations' financing decisions.
    Keywords: financing decisions,German tax reform,interest barrier,leverage, taxation,thin capitalisation rules
    JEL: H21 H24 H25 C54
    Date: 2015

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