nep-pub New Economics Papers
on Public Finance
Issue of 2015‒04‒02
thirteen papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Different Approach of Tax Progressivity Measurement By Govori, Florije
  2. Taxation and Poverty By Christopher P. Chambers; Juan D. Moreno-Ternero
  3. Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment By Owen M. Zidar
  4. On the redistributive efficiency of fiscal policy By Kyriacou, Andreas; Muinelo-Gallo, Leonel; Roca-Sagalés, Oriol
  5. Inequality and the composition of taxes By Andrew Pickering; Sheraz Rajput
  6. Taxing Wealth By McGrattan, Ellen R.
  7. The Taxation of Foreign Profits: a Unified View By Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
  8. Revisiting the narrative approach of estimating tax multipliers By Hebous, Shafik; Zimmermann, Tom
  9. Coordination and the fight against tax havens By Konrad, Kai A.; Stolper, Tim
  10. Wealth Inequality, Family Background, and Estate Taxation By Mariacristina De Nardi; Fang Yang
  11. Behavioral Responses to Taxation: Cigarette Taxes and Food Stamp Take-Up By Rozema, Kyle; Ziebarth, Nicolas R.
  12. Approaches to Taxation of Non-Profit Organizations in France and Implications for Russia By Kazakova, Maria
  13. Allocating Tax Revenue to Sub-Central Government Levels: Lessons from Germany and Poland By Malgorzata Magdalena Hybka

  1. By: Govori, Florije
    Abstract: Measuring income tax progression is a matter of many debates among groups with specific social interests. These debates are a consequence of disagreements regarding the model they prefer for measuring income tax progression. For this reason, authors with interest in this field suggest different measuring methods. As such, values resulting from these measurements differ for a given tax system, and neglect to show any relation of tax progression in a given level of income with the prior level of income tax. In this paper, a new model of measuring income tax progression is introduced, one that takes into account income levels as related to previous income tax levels.
    Keywords: income tax; tax progression; tax liability; measuring income tax progression
    JEL: H2 H20 H21
    Date: 2015–01
  2. By: Christopher P. Chambers (University of California at San Diego); Juan D. Moreno-Ternero (U. Pablo de Olavide y CORE, Université catholique de Louvain)
    Abstract: We explore the implications of four natural axioms in taxation: continuity (small changes in the data of a taxation problem should not lead to large changes in the tax allocation), equal treatment of equals (agents with the same pre-tax incomes pay equal taxes), consistency (the way in which a group allocates a tax burden is immune to secessions of taxpayers) and composition down (an increase in the tax burden is handled according to agents' current post-tax incomes). The combination of the four axioms characterizes a large family of rules, which we call generalized equal-sacrifice rules, encompassing the so-called equal-sacrifice rules (such as the flat tax), as well as constrained equal-sacrifice rules (such as the head tax), and exogenous poverty-line rules (such as the leveling tax, and some of its possible compromises with the previous ones).
    Keywords: taxation, poverty, equal sacrifice, consistency, composition.
    JEL: D63
    Date: 2015–03
  3. By: Owen M. Zidar
    Abstract: This paper investigates how tax changes for different income groups affect aggregate economic activity. I construct a measure of who received (or paid for) tax changes in the postwar period using tax return data from NBER's TAXSIM. I aggregate each tax change by income group and state. Variation in the income distribution across U.S. states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and that the effect of tax cuts for the top 10% on employment growth is small.
    JEL: E32 E62 H2 H20 H31 N12
    Date: 2015–03
  4. By: Kyriacou, Andreas; Muinelo-Gallo, Leonel; Roca-Sagalés, Oriol
    Abstract: This article analyses the redistributive efficiency of public spending and taxation in a panel of both advanced and developing economies during the last three decades (1984-2012). In order to explore how redistribution is achieved through fiscal policies, a two-stage approach is applied. First, we evaluate the redistributive efficiency of public spending and taxes by using Data Envelopment Analysis (DEA) and obtain considerable variation in redistributive efficiency scores across countries. Second, we use panel truncated and OLS regression analysis to identify the determinants of these differences and reveal the crucial role of economic development, government quality and demographic factors.
    Keywords: government efficiency, redistribution, fiscal policy, data envelopment analysis, panel data
    JEL: E02 E62 H11 H53
    Date: 2015–03–27
  5. By: Andrew Pickering; Sheraz Rajput
    Abstract: This paper analyzes the political economics of the composition of taxes. Taxes may be levied on income, or on expenditure, and the median voter is pivotal in the theoretical framework analyzed. As in Meltzer and Richard (1981) income taxes increase with inequality. Conversely expenditure taxes first increase and then decrease with increasing inequality. The extent to which taxes are levied on income relative to expenditure unambiguously rises with inequality. Cross-country data exhibit a robust positive correlation between the extent to which taxes are levied on income relative to expenditure, and inequality. Consistent with the theory this relationship holds most significantly in stronger democracies.
    Keywords: tax structure, inequality
    JEL: D78 E62 H20
    Date: 2015–03
  6. By: McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis)
    Abstract: Some have proposed wealth taxation as a means of reducing economic inequality, but such proposals are premature. While economic theory and data measurement have solid grounding when analyzing other forms of taxation, such as income or sales taxes, this is not the case for wealth Total estimates of the two most widely used measures of wealth, fixed assets and net worth, vary widely over the six decades for which data are available. Trend lines in these two wealth measures are rarely correlated. In addition, the relationship between the two—and explanation of why they differ so radically—remains a theoretical puzzle for economists. Given this state of affairs, accurate predictions for the impact, and design, of wealth taxation policies are not yet possible.
    Date: 2015–03–24
  7. By: Devereux, Michael P.; Fuest, Clemens; Lockwood, Ben
    Abstract: This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the mobile factor. Unless the cost of adjustment is zero, the domestic tax on foreign-source income should always be set to ensure the optimal allocation of the mobile factor between domestic and foreign assets and should follow the classical rules in the literature; national optimality requires the deduction rule, and global optimality requires the credit rule. Only in the zero-cost case does exemption become optimal. Allowances can be set so as to ensure that domestic and foreign asset purchases are undistorted by the tax system: this requires a cash-flow tax on domestic investment in the greenfield case, and a cross-border cash flow tax on foreign investment in both cases. These basic results extend to various extensions of the model, notably (i) when a profit-shifting motive is present; (ii) to some extent, when a corporate income tax is in place. The introduction of tax administration costs into the model can explain the empirical trend towards use of the exemption regime.
    Keywords: corporate taxation; multinational firms; repatriation
    JEL: F23 H25
    Date: 2015–03
  8. By: Hebous, Shafik; Zimmermann, Tom
    Abstract: A number of recent studies regress a "narratively" identified measure of a macroeconomic shock directly on an outcome variable. In this note, we argue that this approach can be viewed as the reduced-form regression of an instrumental variable approach in which the narrative time series is used as an instrument for an endogenous series of interest. This motivates evaluating the validity of narrative measures through the lens of a randomized experiment. We apply our framework to four recently constructed narrative measures of tax shocks by Romer and Romer (2010), Cloyne (2013), and Mertens and Ravn (2012). All of them turn out to be weak instruments for observable measures of taxes. After correcting for weak instruments, we find that using any of the considered narrative tax measures as an instrument for cyclically adjusted tax revenues yields tax multiplier estimates that are indistinguishable from zero. We conclude that the literature currently understates the uncertainty associated with quantifying the tax multiplier.
    Keywords: Narrative Approach,Fiscal Stabilization,Tax Multiplier,Weak Instruments
    JEL: E62 H30 E69 C54
    Date: 2015
  9. By: Konrad, Kai A.; Stolper, Tim
    Abstract: The success or failure of the fight against tax havens is the outcome of a coordination game between a tax haven and its potential investors. Key determinants are the costly international pressure and the haven country's revenue pool. The latter is determined endogenously by the decisions of many individual investors. Our findings explain why some havens attract large sources of international investment and earn large revenues while other countries do not, and why their profits are not competed away. We identify a trade-off between fighting tax havens and high tax rates or, similarly, small fines for disclosed tax evasion.
    Keywords: initiatives against harmful tax practices; tax evasion; tax havens
    JEL: G20 H26 H87
    Date: 2015–03
  10. By: Mariacristina De Nardi; Fang Yang
    Abstract: This paper provides two main contributions. First, it provides a new theory of wealth inequality that merges two forces generating inequality: bequests motives and inheritance of ability of across generations; and an earnings process that allows for more earnings risk for the richest. Second, it uses a calibrated framework to study the effects of changing estate taxation on inequality, aggregate capital accumulation and output, the economic advantage of being born to a given parental background, and welfare. Our calibrated model generates realistically skewed distributions for wealth, earnings, and bequests, and implies that parental background is a crucial determinant of one’s expected lifetime utility. We find that increasing the estate tax rate would significantly reduce wealth concentration in the hands of the richest few, and would reduce the economic advantage of being born to a super-rich family, but also would lower aggregate capital and output. Lastly, it would also generate a significant welfare gain from the ex-ante standpoint of a newborn under the veil of ignorance.
    JEL: D1 D14 D31 E21 E6 H2
    Date: 2015–03
  11. By: Rozema, Kyle (Cornell University); Ziebarth, Nicolas R. (Cornell University)
    Abstract: This paper investigates a previously unexplored behavioral response to taxation: whether smokers compensate for higher cigarette taxes by enrolling in food stamps. First, we show theoretically that increases in cigarette taxes can induce food stamp take-up of non-enrolled, eligible smoking households. Then, we study the theoretical predictions empirically by exploiting between and within-household variation in food stamp enrollment from the Current Population Survey as well as data from the Consumer Expenditure Survey. The empirical evidence strongly supports the model predictions. Higher cigarette taxes increase the probability that low-income smoking households take-up food stamps.
    Keywords: cigarette taxes, food stamp take-up, tax pass-through rate, unintended consequences
    JEL: L66 H21 H23 H26 H71 I18
    Date: 2015–03
  12. By: Kazakova, Maria (Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration)
    Abstract: This paper describes the basic rules as well as some details of tax treatment applicable to non-commercial organizations and their donors in France, assesses problematic issues of their use and identifies the instruments used as part of the tax treatment to reduce the possibilities of abuse and the advisability of adapting them in the Russian tax system. Based on the results of the analysis, proposals are formulated on the improvement of legislation of the Russian Federation in the area of taxation of non-commercial organizations.
    Keywords: Taxation of non-commercial organizations, Non-commercial organizations, Nonprofit organizations, Non-for-profit organizations, Charitable organizations, Corporate tax, Taxation, Income taxation of organizations; Taxation of non-commercial organizations, Non-commercial organizations, Nonprofit organizations, Non-for-profit organizations, Charitable organizations, Corporate tax, Taxation, Income taxation of organizations
    Date: 2014–06
  13. By: Malgorzata Magdalena Hybka (Uniwersytet Ekonomiczny w Poznaniu)
    Abstract: Tax sharing arrangements provide considerable financial resources to sub-central government levels. This statement is true both for unitary and federal states although tax revenue sharing mechanisms differ significantly across countries. The basic aim of this article is to compare the mechanisms adopted in Germany and in Poland. It assesses the degree of tax autonomy granted to sub-central government levels in the countries analysed, overviews the principles of apportionment of joint (shared) taxes and presents statistics on tax revenue composition of sub-central government levels.
    Keywords: apportionment of tax revenue, fiscal federalism, Germany, Poland
    JEL: H2 H7
    Date: 2015–03

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