nep-pub New Economics Papers
on Public Finance
Issue of 2015‒06‒20
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Flat Tax, the solution? By Flamino Viola; Margarida Saraiva
  2. Are income taxes destined to rise? the fiscal imbalance and future tax policy By Saving, Jason L.; Viard, Alan D.
  3. Corporate tax in an international environment - Problems and possible remedies By Seppo Kari
  4. The Right Type of Legislator: A Theory of Taxation and Representation By Mattozzi, Andrea; Snowberg, Erik
  5. Political (In)Stability of Social Security Reform By Joanna Tyrowicz; Krzysztof Makarski
  6. The Political Economy of Social Security Funding: Why Social VAT Reform? By Hideki Konishi
  7. Can GTA Municipalities Raise Property Taxes? An Analysis of Tax Competition and Revenue Hills By Almos Tassonyi, Richard M. Bird, and Enid Slack
  8. Declining female labor supply elasticities in the U.S. and implications for tax policy: evidence from panel data By Kumar, Anil; Liang, Che-Yung

  1. By: Flamino Viola (CEFAGE e Universidade de Évora); Margarida Saraiva (CEFAGE e Universidade de Évora)
    Abstract: This article presents a comparative study of the tax burden of the Portuguese tax system, with the application of progressive rates and proportional rates (flat tax) in determining personal income tax. For this work we chose case study methodology, specifically comparative case study methodology, because it is understood to be the one best suited to the complexity of the subject under review. The results demonstrate that flat tax respects the constitutional principle of progressive tax rates; Portuguese taxpayers with lower (higher) incomes pay less (more) taxes on personal income compared to the flat tax; that the existence of progressive rates does not mean Portuguese taxpayers benefit; and that the flat tax can achieve higher tax revenue than the IRS (Individual Income Tax) in force. Although adoption of the flat tax is possible, it is not believed this adoption would be feasible for political reasons.
    Keywords: Individual income tax; Flat tax; Progressive tax; Proportional tax; Portuguese fiscal economy.
    JEL: H24
    Date: 2015
  2. By: Saving, Jason L. (Federal Reserve Bank of Dallas); Viard, Alan D. (American Enterprise Institute)
    Abstract: We present a model of optimizing government behavior in which a need for increased revenue leads to the introduction of a new revenue source, such as a VAT, accompanied by a reduction in income taxes. We argue that this is a plausible outcome for the United States, in view of international experience and recent fiscal reform proposals, and has important implications for individual investment decisions.
    Date: 2015–01–01
  3. By: Seppo Kari
    Abstract: This paper addresses the problems of corporate taxation in a globalized world. It first illustrates recent trends in international practices and then reviews the literature on the effects of corporate taxes in closed and open economies. The paper emphasizes the severity of the problems caused by current international tax rules. It compares various national and international policy proposals and considers two recent Nordic tax reform proposals as examples of national-level solutions. The problems of current international corporate taxation are fundamental. Introducing increasingly tight anti-avoidance measures could serve as a medium term approach but does not provide any promising long-term solution. There should be more research concerning initiatives that would reform the fundamental principles of the international tax system.
    Keywords: corporation tax, international taxation, multinational firms, tax avoidance
    JEL: H87 H32 F23 H25
    Date: 2015–03–17
  4. By: Mattozzi, Andrea; Snowberg, Erik
    Abstract: Theories of taxation conclude that legislators' ability to target redistribution to their districts’ results in higher government spending and taxation. Yet, despite the fact that securing “pork” is an important part of a legislator's job in the U.S., but not in European countries, the U.S. has lower taxes. Our analysis adds a simple assumption to standard models to reconcile them with this fact. Our assumption - that those who are successful in the private sector will also tend to be successful in negotiating transfers for their district - allows our theory to match stylized facts about class representation in legislatures. The model can then be used to examine policies aimed at increasing descriptive representation in legislatures. We find that many of these policies have no, or negative, effects on descriptive representation, including: increasing the number of representatives, allowing parties to choose candidates, or giving parties some ability to discipline legislator's votes and screen candidates. On the other hand, two policies are found to be particularly effective for increasing descriptive representation: proportional representation and limiting competition between legislators.
    Keywords: Political Economy, Citizen Candidates, Taxation, Redistribution, Representation, Legislatures
    JEL: D02 D63 D72 D78 H10 H23
    Date: 2015
  5. By: Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland); Krzysztof Makarski (National Bank of Poland; Warsaw School of Economics)
    Abstract: In this paper we consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme (i.e. unprivatizing the pension system). We compare politically stable and politically unstable reforms and show that even if the funded system is overall welfare enhancing, the cohort distribution of benefits along the transition path turns unprivatizing social security politically favorable.
    Keywords: pension system reform, time inconsistency, welfare
    JEL: H55 D72 C68 E17 E27
    Date: 2015
  6. By: Hideki Konishi (School of Political Science and Economics, Waseda University)
    Abstract: Recently, taxation reforms entailing a “social” valued-added tax (VAT), i.e., a social security reform shifting funding from traditional wage-based taxation to consumption taxation, have been obtaining political support in some developed countries; e.g. Japan, France, Denmark, and Germany. This paper analyzes the political economy of social security funding in an overlapping-generations economy. In particular, we consider how population aging influences the choice of wage or consumption tax financing by focusing on their differential impact on inter- and intragenerational redistribution. Our results show that population aging may drastically alter the political equilibrium, in that if the population growth rate is higher than the interest rate, wage taxation is the only equilibrium choice, but if it is lower, multiple equilibria are likely to emerge, in which the introduction of consumption taxation emerges as an alternative equilibrium choice.
    Keywords: political economy of social security, consumption tax, structure-induced equilibrium
    JEL: D78 H55
    Date: 2014–04
  7. By: Almos Tassonyi, Richard M. Bird, and Enid Slack (University of Toronto)
    Abstract: This paper applies an empirical lens to this controversial question. Cities in the GTA and across Canada are reluctant to raise property taxes, both because the public resists paying higher taxes, and because cities are concerned that property owners will move to jurisdictions with lower tax burdens. The authors find that overall there is room for most municipalities in the GTA to increase property taxes without, in most cases, lowering the tax base.
    Keywords: property taxes, municipalities, tax competition, revenue hills, Toronto, Canada
    JEL: H11 H72
    Date: 2015–05
  8. By: Kumar, Anil (Federal Reserve Bank of Dallas); Liang, Che-Yung (Uppsala University)
    Abstract: Recent work has provided compelling evidence of a long-term decline in US female labor supply elasticities with respect to wages and to income. While previous work used cross-sectional data from the Current Population Survey (CPS), we reexamine the trend for married women using panel data from the Panel Study of Income Dynamics (PSID) from 1980 to 2006. We find evidence in support of a long-term decline in married females’ labor supply elasticities on the participation margin, but less so on the hours margin. We also extend the analysis to investigating the implications of these results on welfare effects of tax reforms. Policy simulations indicate that shrinking elasticities, mostly concentrated on the participation margin, have contributed to a dramatic decline in welfare gains from actual and potential tax reforms since the 1980’s.
    Keywords: Female labor supply; Taxes and labor supply
    JEL: H21 H24 H31 J22
    Date: 2015–01–01

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