nep-pub New Economics Papers
on Public Finance
Issue of 2016‒05‒08
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Impact of Taxes and Wasteful Government Spending on Giving By Roman M. Sheremeta; Neslihan Uler
  2. Discontent with taxes and the timing of taxation : experimental evidence By Vranceanu, Radu; Sutan, Angela; Dubart, Delphine
  3. "Flattening" the Tax Evasion: Evidence from the Post-Communist Natural Experiment By Filer, Randall K.; Hanousek, Jan; Lichard, Tomáš; Torosyan, Karine
  4. A Note on Home Bias and the Gain from Non-Preferential Taxation By Kaushal Kishore
  5. The Distributional Effects of a Carbon Tax on Current and Future Generations By Fried, Stephie; Novan, Kevin; Peterman, William B.
  6. Public bad conflicts: Cyclical Nash strategies and Stackelberg solutions By Halkos, George; Papageorgiou, George
  7. Growth of income and welfare in the U.S, 1979-2011 By John Komlos
  8. How Efficient are the Current U.S. Beer Taxes? By Vinish Shrestha
  9. The Effect of Registration Taxes on New Car Sales and Emissions: Evidence from Switzerland By Massimo Anna Alberini; Markus Bareit
  10. Environmental Taxes and Rural-Urban Migration - A Study from China By Jing Cao

  1. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University); Neslihan Uler (Institute for Social Research, the University of Michigan)
    Abstract: We examine the impact of taxes and wasteful government spending on charitable giving. In our model, the government collects a flat-rate tax on income net of donations and wastes part of the tax revenue before redistribution. The model provides theoretical predictions which we test in a framed field experiment. The results of the experiment show that the tax rate has a weak and insignificant effect on giving. The degree of waste, however, has a large, negative and significant effect on giving, with the relationship moderated by the curvature in the utility function.
    Keywords: giving, charity donations, tax, waste, redistribution, experiments
    JEL: C90 D64 H41
    Date: 2016
  2. By: Vranceanu, Radu (Essec Business School, Economics Department); Sutan, Angela (University of Bourgogne Franche-Comté, ESC Dijon); Dubart, Delphine (Essec Business School)
    Abstract: This paper reports results from a linear sanction cost variant of the power-to-take game, with implications for tax policies. We compare a pay-as-you-earn (PAYE) system with an ex-post taxation system in which payroll taxes are collected at the end of the fiscal year. Dissatisfaction with taxation, as proxied by the sanction in the power-to-take game, is significantly higher in an ex-post taxation system compared with the PAYE system. However, in anticipation of the higher sanction, the "tax authority" will not apply lower taxes in the former system. Communication does not decrease dissatisfaction in a significant manner, and it is not used extensively by participants.
    Keywords: Power-to-take game; Experiments; Tax systems; Dissatisfaction with taxes
    JEL: C91 D01 H26
    Date: 2016–03–01
  3. By: Filer, Randall K.; Hanousek, Jan; Lichard, Tomáš; Torosyan, Karine
    Abstract: We analyze the response of tax evasion to the introduction of a flat tax in several transition economies. Using a novel estimator based on household level data, we show that in most of the studied countries there was no discernible effect on the measured size of unreported income following flat tax reform. This may imply that decreases in marginal tax rate may frequently have been accompanied by parallel deterioration in attitudes towards public services and these countries' government in general as the only countries that show a response to the flat tax reform appear to be those where satisfaction with government services increased. Additionally, our results show a pro-cyclicality of the size of the shadow economy that is in line with previous research.
    Keywords: consumption-income gap; Flat tax; tax evasion; tax reform; underreporting
    JEL: C34 H26
    Date: 2016–04
  4. By: Kaushal Kishore (Department of Economics, University of Pretoria)
    Abstract: In a symmetric model of tax competition, we support the claim in Haupt and Peters (2005) that a non-preferential regime generates higher tax revenues compared to a preferential regime when investors have home bias. Further, we show that a complete ban on preferential taxation is desirable even when capital base is in?finitely elastic.
    Keywords: Tax competition, Nash Equilibrium, Non-preferential regime
    JEL: C72 F20 H26
    Date: 2016–04
  5. By: Fried, Stephie; Novan, Kevin; Peterman, William B.
    Abstract: This paper examines the non-environmental welfare effects of introducing a revenue- neutral carbon tax policy. Using a life cycle model, we find that the welfare effects of the policy differ substantially for agents who are alive when the policy is enacted compared to those who are born into the new steady state with the carbon tax in place. Consistent with previous studies, we demonstrate that, for those born in the new steady state, the welfare costs are always lower when the carbon tax revenue is used to reduce an existing distortionary tax as opposed to being returned in the form of lump-sum payments. In contrast, during the transition, we find that rebating the revenue with a lump sum transfer is less costly than using the revenue to reduce the distortionary labor tax. Additionally, we find that the tax policy is substantially more regressive over the transition than in the steady state, regardless of what is done with the revenue. Overall, our results demonstrate that estimates of the non-environmental welfare costs of carbon tax policies that are based solely on the long-run, steady state outcomes may ultimately paint too rosy of a picture. Thus, when designing climate policies, policymakers must pay careful attention to not only the long-run outcomes, but also the transitional welfare costs and regressivity of the policy.
    Keywords: Carbon taxation ; overlapping generations
    JEL: E62 H21 H23
    Date: 2016–04–20
  6. By: Halkos, George; Papageorgiou, George
    Abstract: The first purpose of this paper is to study the dynamics of a general socially undesirable public evil and the possibility of cyclical Nash strategies in equilibrium. As a second result of the paper we found the analytical solutions of the hierarchical (Stackelberg) game for the public bad accumulation model. In both cases we use the differential game modeling, as the appropriate tool for the economic analysis that follows. The control setting is not the usual one, which assumes an accumulated stock of a public bad (e.g. pollutants, wastes or even tax evasion), but we claim that the disadvantage which is responsible for the unwished public evil accumulation is the use of the available inputs and equipment. Therefore, this could be a crucial assumption which possibly prevents the irreversibility of the public bad accumulation. As a continuation, we set as stock the available resources (inputs plus equipment) and the stress of the regulator is to reduce these resources. In the first case of Nash equilibrium, we find that the establishment of cyclical strategies, during the game between the agents in charge and the regulator, requires that the agents’ discount rate must be greater than the government’s discount rate, i.e., the agents in charge must be more impatient than the government (acting as the regulator). In the second case of the hierarchical setting, we provide the analytical expressions of the strategies as well as the steady state value of the resources’ stock. We use the notion of a public bad as the opposite meaning to the public good.
    Keywords: Public bad; cyclical policies; Nash equilibrium; Stackelberg equilibrium.
    JEL: C61 C62 D43 H21 Q50 Q58
    Date: 2016–04–11
  7. By: John Komlos
    Abstract: We estimate growth rates of real incomes in the U.S. by quintiles using the Congressional Budget Office’s (CBO) post-tax, post-transfer data as basis for the period 1979-2011. We improve upon them by including only the present value of earnings that will accrue in retirement and excluding items included in the CBO income estimates such as “corporate taxes borne by labor” that do not increase either current purchasing power or utility. We estimate a high and a low growth rate using two price indexes, the CPI and the Personal Consumption Expenditure index. The major consistent findings include what in the colloquial is referred to as the “hollowing out” of the middle class. According to these estimates, the income of the middle class 2nd and 3rd quintiles increased at a rate of between 0.1% and 0.7% per annum, i.e., barely distinguishable from zero. Even that meager rate was achieved only through substantial transfer payments. In contrast, the income of the top 1% grew at an astronomical rate of between 3.4% and 3.9% per annum during the 32-year period, reaching an average annual value of $918,000, up from $281,000 in 1979 (in 2011 dollars). Hence, the post-tax, post-transfer income of the 1% relative to the 1st quintile increased from a factor of 21 in 1979 to a factor of 51 in 2011. However, income of no other group increased substantially relative to that of the lowest quintile. Oddly, the income of even those in the 96-99 percentiles increased only from a multiple of 8.1 to a multiple of 11.3. We next estimate growth in welfare assuming diminishing marginal utility of income. A logarithmic utility function yields a growth in welfare for the middle class of roughly 0.01% to 0.07% per annum, which is indistinguishable from zero. With interdependent utility functions only the welfare of the 5th quintile experienced meaningful growth while those of the first four quintiles tend to be either negligible or even negative.
    JEL: D30 D60 E0 I31 N12
    Date: 2016–04
  8. By: Vinish Shrestha (Department of Economics, Towson University)
    Abstract: This paper examines the status of current beer taxes in the U.S. by questioning how far away the present beer taxes are from the optimal taxes. Following the estimation of tax elasticity, I estimate the lifetime discounted costs that a heavy drinker levies on others through: 1) Years of life lost; 2) Social insurance system; 3) Drunk driving accidents; and 4) Forgone income taxes. The optimal level of beer tax ranges from 17.15 percent to 47.5 percent of the price per drink. Even the conservative estimates suggest that current beer taxes comprise only 16 percent of the external costs.
    Keywords: Externality, Beer Taxation, Efficiency.
    JEL: H21 H23 I10
    Date: 2016–04
  9. By: Massimo Anna Alberini (University of Maryland,USA); Markus Bareit (ETH Zurich, Switzerland)
    Abstract: In Switzerland, the annual circulation taxes on road vehicles are set by and paid to the cantons (not to the federal government). We exploit the 26 different circulation tax rules and their variation over time, which we interpret as a natural experiment, to see if linking them to a vehicle’s CO2 emissions rate has helped shift new car sales towards cleaner, lower-emitting vehicles. We find that even when the penalty associated with a highly polluting vehicle is high, the effect is relatively small. For example, in canton Zurich, imposing a 50% “malus” on the annual registration fee for cars that emit 200 or more grams of CO2 per kilometer reduces the average CO2 emissions rate from new cars by only 0.46 gram per kilometer, bringing it to 158.11 grams per kilometer in 2011. A similar effect would be attained with a modest increase in fuel taxes.
    Keywords: vehicle demand estimation; fuel economy; fuel taxes; vehicle taxes; carbon dioxide emissions rates.
    JEL: L62 Q4 Q5
    Date: 2016–05
  10. By: Jing Cao (Harvard China Project, Harvard University Center for the Environment and School of Economics and Management Tsinghua University, Beijing)
    Abstract: This study investigates the potential impact of two environmental tax regimes on the movement of rural people to China's cities. The study models the impact of a fuel tax and an output tax on the country's economy to get a full picture of how they would affect people's livelihoods and welfare, and how this would, in turn, affect rural-urban migration. The study sheds light on the implications of future environmental taxes and how they would affect urbanization and "rural-urban" migration in China. The study finds that both proposed taxes would discourage the flow of migrants from China's countryside to its cities. This would therefore exacerbate the current distortions in the country's labour market, where there is a surplus of rural labour. A comparison of the impact of the two taxes shows the fuel tax to be more efficient in terms of reducing pollution emissions and their associated environmental and health impacts. It also produces less distortion in the rural-urban migration process than the output tax. The study therefore recommends that this would be the preferable policy.
    Keywords: environmental taxation, rural-urban, China
    Date: 2016–04

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