nep-pub New Economics Papers
on Public Finance
Issue of 2016‒01‒29
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Consumption taxes and taste heterogeneity By Stéphane Gauthier; Fanny Henriet
  2. Redistribution Through Charity, and Optimal Taxation when People are Concerned with Social Status By Thomas Aronsson; Olof Johansson-Stenman; Ronald Wendner
  3. Transforming Federal and State Retirement Tax Deductions By Teresa Ghilarducci; Ismael Cid-Martinez
  4. Fiscal Decentralization and Decentralizing Tax Administration: Different Questions, Different Answers By Richard M. Bird
  5. Taxation trends in the European Union: 2015 edition By European Commission
  6. Distributional Effects of Social Security Reforms: the Case of France By Raquel Fonseca; Thepthida Sopraseuth
  7. Corporate Flat Tax Reforms and Businesses' Location Choices. Evidence from Switzerland By Sergio Galletta; Agustin Redonda
  8. Aspects of Fiscal Policy in Turkey By Ebru Voyvoda; Erinc Yeldan

  1. By: Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Fanny Henriet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)
    Abstract: We study optimal commodity taxes in the presence of non-linear income taxes when agents differ in skills and tastes for consumption. We show that commodity taxes are partly determined by a many-person Ramsey rule when there is taste heterogeneity within income classes. The usual role of consumption taxes in relaxing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes. We quantify the importance of these two components on Canadian microdata using a new method to identify empirically the binding incentive constraints. Incentives matter but tax exemptions are mostly justified by Ramsey considerations.
    Keywords: taste heterogeneity, commodity taxes, income taxation, empirical tests for asymmetric information, social weights
    Date: 2016–01–07
  2. By: Thomas Aronsson (Umea University); Olof Johansson-Stenman (University of Gothenburg); Ronald Wendner (University of Graz)
    Abstract: This paper deals with tax policy responses to charitable giving based on a model of optimal redistributive income taxation. The major contribution is the simultaneous treatment of (i) warm-glow and stigma effects of charitable donations; (ii) that the warm glow of giving and stigma of receiving charity may to some extent depend on relative comparisons; and (iii) that people are also concerned with their relative consumption more generally. Whether charity should be taxed or supported turns out to largely depend on the relative strengths of the warm glow of giving and the stigma of receiving charity, respectively, and on the positional externalities caused by charitable donations. In addition, imposing stigma on the mimicker (via a relaxation of the self-selection constraint) strengthens the case for subsidizing charity. We also consider a case where the government is unable to target the charitable giving through a direct tax instrument, and examine how the optimal marginal income tax structure is adjusted in response to charitable giving.
    Keywords: Conspicuous consumption; conspicuous charitable giving; optimal income taxation; warm glow; stigma
    JEL: D03 D62 H21 H23
    Date: 2016–01
  3. By: Teresa Ghilarducci; Ismael Cid-Martinez (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Published in the Marquette Benefits and Social Welfare Law Review, this paper discusses how the United States' system of voluntary, tax-favored retirement accounts has failed to produce adequate retirement savings. It recommends switching the ineffective and regressive system of tax deductions for contributions to qualified retirement accounts to providing every American with a tax credit. This revenue-neutral policy change would provide an equitable and effective means of ensuring that all working Americans have retirement savings.
    Keywords: Retirement, 401(k), Tax, Deductions
    JEL: H55 J26 J32 D63 E21
    Date: 2015–06
  4. By: Richard M. Bird (University of Toronto)
    Abstract: The case for decentralizing taxes does not imply that these taxes need to be administered locally. Nor is it is necessarily constrained by the weakness of local tax administration. Tax decentralization and the decentralization of tax administration are related but separable decisions. As discussed in this paper, different countries have at different times have reached different conclusions about the appropriate way to mix and match these issues. No country may have it quite right when taking all the relevant factors into consideration, at least when viewed from outside. However, decisions on such matters are not made outside but inside specific countries, few involved in such decisions are likely to attach the same weights to all factors, and usually no one has the full story in mind when decisions are made. As with many questions of institutional design, there is no one size fits all correct answer to either the question of the extent to which taxes should be decentralized or the question of whether such taxes should also be administered in a decentralized fashion. However, thinking through these two distinct questions separately can be a useful step towards achieving better outcomes.
    Date: 2015–11
  5. By: European Commission
    Abstract: This report contains a detailed statistical and economic analysis of the tax systems of the Member States of the European Union, plus Iceland and Norway, which are Members of the European Economic Area. The data are presented within a unified statistical framework (the ESA95 harmonised system of national and regional accounts), which makes it possible to assess the heterogeneous national tax systems on a fully comparable basis.
    Keywords: European Union, taxation
    JEL: H23 H24 H25 H27 H71
    Date: 2015–12
  6. By: Raquel Fonseca; Thepthida Sopraseuth
    Abstract: This paper uses a calibrated dynamic life-cycle model to quantify the long-run distributional impact of two opposite Social Security reforms: modifying the parameters of a defined benefit (DB) plan (such as in France with Ayrault’s reform) or switching to a notional defined contribution (NDC) plan (such as in Italy). Both reforms yield an inequal distribution of welfare losses. Low-skilled workers are the main losers of the reforms. This is so for different reasons in each reform. In the case of Ayrault’s reform, low-skilled individuals delay retirement by 2 years, up to age 62. In switching to a NDC scheme, low-skilled workers’pensions fall substantially. In NDC schemes, inequalities along the working-life are directly translated into inequalities in pension levels. The switch from a DB plan to the Italian reform yields substantial welfare losses, pensions drastically fall, and individuals save more. Since low-skilled workers do not save as much as middle or high-skilled workers, the switch to NDC schemes leads to a more unequal society in terms of asset distribution.
    Keywords: Pension reforms, life-cycle heterogeneous-agent model, distributional effects
    JEL: E24 H31 H55 J26
    Date: 2015
  7. By: Sergio Galletta (IdEP, Economia, Universita' Svizzera italiana, Switzerland); Agustin Redonda (Council on Economic Policies (CEP), Switzerland)
    Abstract: Profit taxation affects corporate investment decisions through several channels. This paper focuses on the impact of corporate income flat tax reforms on businesses' location choices. Since 1990, Swiss states (cantons) have been switching from a graduated to a flat tax rate scheme on profits. The paper assesses the effects of such a reform on the number of establishments by computing a difference-in-differences estimation. Our results show a negative impact on the number of firms in a given jurisdiction. Interestingly, the effect is considerably larger for riskier firms, suggesting the presence of an insurance effect from progressive taxation for risk-averse entrepreneurs.
    Keywords: Corporate taxes, Business location, Flat-tax, Tax reform, Progressive taxation
    JEL: H25 H32 H71 R3
    Date: 2016–01–18
  8. By: Ebru Voyvoda (Middle East Technical University); Erinc Yeldan (I.D. Bilkent University)
    Abstract: This report studies the aspects of fiscal policy in post -1980 Turkey. The 1990s had been a period of acute deterioration of the public sector balances with increased indebtedness and the rising interest burden. On the other hand, the post-2001 period witnessed a significant narrowing of the fiscal budget deficits. This is often hailed as a discriminatory success of the Turkish Republic, during when the European economies suffer from a public debt crisis. Currently Turkey stands as the largest candidate country which certainly comprises differences with the EU Member States and to other candidate countries. Yet, the Turkish experience in economic policy making in the neo-liberal era should provide repercussions for the European geography, especially in the aftermath of the global financial crisis of 2008-9.
    Keywords: Fiscal Policy, Turkey, Debt Sustainability, IMF
    JEL: H10 H50 H62 H63
    Date: 2015–07–01

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