nep-pub New Economics Papers
on Public Finance
Issue of 2016‒05‒14
fifteen papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Choice Experiment on Tax: Are Income and Consumption Taxes Equivalent? By Hirofumi Kurokawa; Tomoharu Mori; Fumio Ohtake
  2. The Taxing Deed of Globalization By Egger, Peter; Nigai, Sergey; Strecker, Nora
  3. Housing and Tax-Deferred Retirement Accounts By Anson T. Y. Ho; Jie Zhou
  4. Family Tax Policy in a Model with Endogenous Fertility à la Barro-Becker By Lucia Granelli
  5. Partial tax harmonization through infrastructure coordination By Sanz Córdoba, Patrícia; Theilen, Bernd, 1965-
  6. The Costs to Different Generations of Policies That Close the Fiscal Gap: Working Paper 2015-10 By Felix Reichling; Shinichi Nishiyama
  7. Do tax incentives for research increase firm innovation? An RD Design for R&D By Elias Einiö; Dechezleprêtre; - Martin Antoine; - Nguyen Ralf; - Van Reenen Kieu-Trang; John
  8. Public debt and economic growth: An empirical evaluation By María del Carmen Ramos-Herrera; Simón Sosvilla-Rivero
  9. Social Security Policy Options, 2015 By Congressional Budget Office
  10. Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016 By Congressional Budget Office
  11. Why Corporate Taxation Means Source Taxation - A Response to the OECD’s Actions against Base Erosion and Profit Shifting By Luzius Cavelti; Christian Jaag; Tobias Rohner
  12. State and federal fuel taxes: The road ahead for U.S. infrastructure funding By Dumortier, Jerome; Zhang, Fengxiu; Marron, John
  13. Economic Impacts of a Carbon Tax in an Integrated ASEAN By Ditya Agung Nurdianto
  14. Regional Financing in Germany and Spain: Comparative Reform Perspectives By Angel De la Fuente; Christian Kastrop; Michael Thöne
  15. The 1920 Japanese income tax reform: government, business and democratic constraints By Shunsuke Nakaoka

  1. By: Hirofumi Kurokawa; Tomoharu Mori; Fumio Ohtake
    Abstract: We test the equivalence of income and consumption taxes through a choice experiment. Under a given set of income and consumption parameters, subjects were asked to choose among an income tax of 20%, a consumption tax of 25% (which is an equivalent tax burden), a consumption tax of 22%, and a consumption tax of 20%. Our results showed that subjects prefer income tax to consumption tax when the nominal consumption tax rate is higher than the nominal income tax rate. However, subjects tend to prefer consumption tax to income tax when the nominal tax rates are identical. Our result, that subjects prefer income tax to consumption tax despite a higher tax burden, implies the consumption tax miscalculation bias. The consumption tax miscalculation bias is one where subjects miscalculate the amount of consumption tax as if it is declared by tax inclusive, as in the case of income tax, despite consumption tax being tax exclusive. If the income tax burden is equivalent to the consumption tax burden, subjects prefer income tax. This result implies that income and consumption taxes are not equivalent due to the consumption tax miscalculation bias.
    Date: 2016–03
  2. By: Egger, Peter; Nigai, Sergey; Strecker, Nora
    Abstract: We examine the effects of globalization on the size and composition of tax revenues, worker-specific tax burdens, and effective average labor income tax rates using a unique international database on income tax calculators. We find that due to increasing mobility of firms and high-income workers, globalization led governments in OECD countries to seek tax revenues from alternative sources, specifically from employee-borne taxes paid by relatively less mobile middle-income workers. In 1994-2007, they experienced a globalization-induced rise in their personal income tax rate of around 1.5, whereas the top 1% of workers faced a reduction of approximately 1.5 percentage points.
    Keywords: Globalization; Income taxes; International Trade; migration; Tax progressivity
    JEL: F1 F6 H2 H3
    Date: 2016–05
  3. By: Anson T. Y. Ho; Jie Zhou
    Abstract: Assets in tax-deferred retirement accounts (TDA) and housing are two major components of household portfolios. In this paper, we develop a life-cycle model to examine the interaction between households’ use of TDA and their housing decisions. The model generates life-cycle patterns of home ownership and the composition of net worth that are broadly consistent with the data from the Survey of Consumer Finances. We find that TDA promotes home ownership, as households take advantage of the preferential tax treatments for both TDA and home ownership. They substitute TDA assets for home equity by accumulating wealth in TDA and making smaller down payments (taking out bigger mortgages); consequently, they become homeowners earlier in their lives. On the other hand, housing-related policies, such as a minimum down payment requirement and mortgage interest deductibility, affect households’ housing decisions more than their use of TDA.
    Keywords: Economic models, Housing
    JEL: C61 D14 D91 E21 H24 R21
    Date: 2016
  4. By: Lucia Granelli (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper assesses quantitatively the effect of family fiscal policies on fertility, labour supply and parental childcare using a general equilibrium model with dynastic households. The introduction of time allocation decisions in the original Barro-Becker framework allows to reconcile the conclusion of the micro-econometric literature on pro-nativist fiscal policies, where such policies have a small effect on fertility, and the theoretical macroeconomic literature, where fertility is deemed to be elastic with respect to macroeconomic shocks. The use of indirect inference for calibrating the elasticity of fertility to fiscal subsidies enables the model to reproduce what observed in US data over the period 1905-2005.
    Date: 2016–04–16
  5. By: Sanz Córdoba, Patrícia; Theilen, Bernd, 1965-
    Abstract: In this article we analyze the role that infrastructure coordination plays to in achieving partial tax harmonization in a coalition of asymmetric jurisdictions. We find that infrastructure coordination with di¤erent investment levels can facilitate partial tax harmonization between asymmetric jurisdictions when asymmetries are not too large. Furthermore, agreeing on a common investment level can be even more e¤ective in facilitating partial tax harmonization between asymmetric jurisdictions. Our results explain the harmonization of corporate tax rates observed in the EU between 1995 and 2006 where there was simultaneous convergence of public infrastructure investments facilitated via EU structural funds. Keywords: Partial Tax Harmonization; Infrastructure Coordination JEL Classification Numbers: F15, F38, H20, H87
    Keywords: Integració econòmica, Política fiscal, Finances internacionals, Impostos, 336 - Finances. Banca. Moneda. Borsa,
    Date: 2016
  6. By: Felix Reichling; Shinichi Nishiyama
    Abstract: This working paper analyzes five stylized changes in federal fiscal policy that would close a fiscal gap of 1.8 percent of GDP, and measures the costs that those policy changes would impose on different generations.
    JEL: E62 E63 H60
    Date: 2015–12–17
  7. By: Elias Einiö; Dechezleprêtre; - Martin Antoine; - Nguyen Ralf; - Van Reenen Kieu-Trang; John
    Abstract: We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme.
    Keywords: R&D, patents, tax, innovation, Regression Discontinuity design
    JEL: H32 O31 H23 O32 H25
    Date: 2016–04–13
  8. By: María del Carmen Ramos-Herrera (Department of Quantitative Economics, Universidad Complutense de Madrid); Simón Sosvilla-Rivero (Department of Quantitative Economics, Universidad Complutense de Madrid)
    Abstract: Based on a data set of 115 economies, this paper empirically investigates the relation between public debt and economic growth. We find that those countries that present low public debt are characterized by higher economic growth, while the smallest growth rates are associated with high public debt. Nevertheless, this conclusion is tempered when we analyse the countries by income level: low-income countries have a different behaviour with respect to lower-middle, upper-middle and high income countries.
    Keywords: Public debt, economic growth
    JEL: C32 H63 O40 O57
    Date: 2016–06
  9. By: Congressional Budget Office
    Abstract: CBO analyzes 36 policy options commonly proposed by policymakers and analysts. Most of them would improve Social Security’s long-term finances, but only a few would significantly postpone the combined trust funds’ exhaustion date.
    JEL: H55 H60 H68 J26
    Date: 2015–12–15
  10. By: Congressional Budget Office
    Abstract: In 2016, low- and moderate-income workers will face an effective marginal tax rate of 31 percent, on average. Federal individual income and payroll taxes will be the main contributors.
    JEL: H20 H24 I38
    Date: 2015–11–19
  11. By: Luzius Cavelti; Christian Jaag; Tobias Rohner
    Abstract: It is widespread practice around the world that corporate entities pay taxes to the country where they are formally registered and to the country in whose territory they have a permanent establishment. While the former is generally known as the ‘country-of-residence’ the latter is usually referred to as the ‘country-of-source’. This article questions separate taxation based on this distinction between the country-of-residence and the country-of-source. It argues for a departure from the traditional international allocation of the right to tax corporate income and suggests that a corporate entity should instead pay income tax exclusively to the countries in which it has relevant business activities. Moreover, in examining the question of where business activities of multinational corporations effectively take place, this article describes criteria for determining source countries. Furthermore, it offers a method for formulary apportionment of corporate income between those countries in which a given multinational corporation generates income. The article argues that source taxation of corporate income would be coherent with the economic nature of corporate income taxation. Source taxation of corporate income would also make the arbitrary concept of corporate residence irrelevant, and it would allow the outdated legal concept of permanent establishment to be abolished. This article takes an interdisciplinary approach to argue from both legal and economic perspectives. It adds to the body of literature that discusses how countries should tax corporate entities doing business across national borders. It also contributes to the ongoing debate about the OECD’s recent controversial efforts to prevent corporations shifting profits between countries to minimize their exposure to national tax systems (base erosion and profit sharing, or BEPS).
    Keywords: Corporate Taxation, BEPS
    JEL: L43 L51
    Date: 2016–04
  12. By: Dumortier, Jerome; Zhang, Fengxiu; Marron, John
    Abstract: Taxes on gasoline and diesel are the primary sources of transportation funding at the state and federal level. Due to inflation and improved fuel efficiency, these taxes are increasingly inadequate to maintain the transportation system. In most states and at the federal level, the real fuel tax rates decrease because they are fixed at a cents-per-gallon amount rather than indexed to inflation. In this paper, we provide a forecast on state and federal tax revenue based on different fuel taxation policies such as indexing to inflation, imposing a sales tax on gasoline and diesel, or using a mileage fee on vehicles. We compare how those taxation policies perform compared to the policies states use currently under different macroeconomic conditions relating to the price of oil, economic growth, and vehicle miles traveled. The baselines projections indicate that between 2015 and 2040, fuel tax revenue will decrease 52.2%-54.9% in states that do not index taxes to inflation and 22.6%-22.9% that do currently index to inflation. Switching to a mileage fee increases revenue between 15.6%-26.9% in 2040 compared to 2015. Indexing fuel taxes to inflation in addition to imposing a states' sales tax increases revenue significantly but suffers from a continuous decline in the long-run due to increased fuel efficiency. Our results indicate that although a mileage fee is politically and technologically difficult to achieve, it avoids a declining tax revenue in the long-run.
    Keywords: gasoline taxes, diesel taxes, VMT fee, simulation, motor fuel tax revenue, Public Economics, Resource /Energy Economics and Policy,
    Date: 2016–04–02
  13. By: Ditya Agung Nurdianto (The Australian National University)
    Abstract: The establishment of an ASEAN Economic Community in 2015 has been on the agenda for quite some time. One issue that recently emerged is the climate change issue in which each member of ASEAN needs to respond. The main goal of this study is to analyze the benefits and losses of cooperation among ASEAN members in mitigating their carbon dioxide (CO2) emission, particularly by implementing a uniform carbon tax across ASEAN. To achieve this goal, this study develops a multi-country computable general equilibrium (CGE) for ASEAN, known as the Inter-Regional System of Analysis for ASEAN (IRSA-ASEAN) model. An ASEAN Social Accounting Matrix (ASEAN-SAM) consisting of Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam is constructed as the main database for this CGE. This study finds that the implementation of a carbon tax scenario is an effective means of reducing carbon emissions in the region. However, this environmental gain could come at a cost in terms of gross domestic product (GDP) contraction and reduction in social welfare, i.e. household income. Nevertheless, Indonesia and Vietnam can still gain from the implementation of a carbon tax depending on how revenues generated from the carbon tax are redistributed.
    Keywords: ASEAN, climate change, CGE, carbon tax
    Date: 2016–04
  14. By: Angel De la Fuente; Christian Kastrop; Michael Thöne
    Abstract: Reforms of regional financing are due soon or even overdue in Spain and in Germany. This research paper compares the systems of regional financing in both countries, describes their financial outcomes, benchmarks them against criteria taken from the modern theory of fiscal federalism and extracts some lessons for reform from this endeavour.
    Keywords: Europe , Research , Spain , Working Paper
    JEL: H77 H71
    Date: 2016–03
  15. By: Shunsuke Nakaoka
    JEL: N0
    Date: 2016–04

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