nep-pub New Economics Papers
on Public Finance
Issue of 2016‒08‒14
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Taxation of couples: a mirrleesian approach for non-unitary households By Costa, Carlos Eugênio da; Lima, Lucas Alves Estevam de
  2. Optimal Tax Administration By Michael Keen; Joel Slemrod
  3. Distributional Effects of Means Testing Social Security: Income Versus Wealth By Alan Gustman; Thomas Steinmeier; Nahid Tabatabai
  4. Tax havens compliance with international standards : a temporal perspective By Patrice Pierreti; Giuseppe Pulina; Skerdilajda Zanaj
  5. Tax Me, But Spend Wisely? Sources of Public Finance and Government Accountability By Gadenne, Lucie

  1. By: Costa, Carlos Eugênio da; Lima, Lucas Alves Estevam de
    Abstract: Optimal tax theory in the Mirrlees’ (1971) tradition implicitly relies on the assumption that all agents are single or that couples may be treated as individuals, despite accumulating evidence against this view of household behavior. We consider an economy where agents may either be single or married, in which case choices result from Nash bargaining between spouses. In such an environment, tax schedules must play the double role of: i) defining households’ objective functions through their impact on threat points, and; ii) inducing the desired allocations as optimal choices for households given these objectives. We find that the taxation principle, which asserts that there is no loss in relying on tax schedules is not valid here: there are constrained efficient allocations which cannot be implemented via taxes. More sophisticated mechanisms expand the set of implementable allocations by: i) aligning the households’ and planner’s objectives; ii) manipulating taxable income elasticities, and; iii) freeing the design of singles’ tax schedules from its consequences on households’ objectives.
    Date: 2016–07–02
  2. By: Michael Keen; Joel Slemrod
    Abstract: This paper sets out a framework for analyzing optimal interventions by a tax administration, one that parallels and can be closely integrated with established frameworks for thinking about optimal tax policy. At its heart is a summary measure of the impact of administrative interventions—the “enforcement elasticity of tax revenue”—that is a sufficient statistic for the behavioral response to such interventions, much as the elasticity of taxable income serves as a sufficient statistic for the response to tax rates. Amongst the applications are characterizations of the optimal balance between policy and administrative measures, and of the optimal compliance gap.
    JEL: H21 H26
    Date: 2016–07
  3. By: Alan Gustman; Thomas Steinmeier; Nahid Tabatabai
    Abstract: This paper compares Social Security means tests that would reduce benefits for recipients who fall in the top quarter of the income distribution with means tests aimed at those in the top quarter of the wealth distribution. Both means tests would reduce the average benefits for the affected groups by about $5,000. The analysis is based on data from the Health and Retirement Study and covers individuals aged 69 to 79 in 2010. About 14.5 percent of retirees in this age group are both in the top quarter of income recipients and in the top quarter of wealth holders. Another 10.5 percent are top quarter income recipients, but not top quarter wealth holders; with an additional 10.5 percent top quarter wealth holders, but not top quarter income recipients. We find that a means test of Social Security based on income has substantially different distributional effects from a means test based on wealth. Moreover, there are substantial differences when a Social Security means test based on income is evaluated in terms of its effects on individuals arrayed by their wealth rather than their income. Similarly, a means test based on wealth will be evaluated quite differently by policy makers who believe that income is the appropriate basis for a means test than by those who believe that means tests should be based on wealth.
    JEL: D04 D31 D63 H55 I3 J14 J18 J32
    Date: 2016–07
  4. By: Patrice Pierreti (CREA, Université du Luxembourg); Giuseppe Pulina (CREA, Université du Luxembourg); Skerdilajda Zanaj (CREA, Université du Luxembourg)
    Abstract: This paper contributes to the debate centring on the fight against aggressive tax avoidance practices through the release of international standards. We develop a model in which identical tax havens decide upon their compliance date while competing for onshore capital. The timing of these decisions depends on the effects of two opposing forces. One force is linked to the tax sensitivity of international capital and the other to the reaction of nearby potential capital. When the former force dominates, asynchronous compliance arises, which occurs even with identical tax havens and perfect information. However, when the latter force dominates, tax havens comply simultaneously. In any case, the loss of the tax base within the onshore region is minimized when compliance is simultaneous and occurs at the earliest possible date. Surprisingly, when the adoption of new standards does not severely reduce the potential supply of capital and onshore capital is sufficiently tax sensitive, the compliance of a lone tax haven does not decrease the loss of tax base relative to the non-compliance of all the havens.
    Keywords: Tax Havens, International standards, Compliance, Timing
    JEL: F21 F23 H23 H25 H26
    Date: 2016
  5. By: Gadenne, Lucie (University of Warwick)
    Abstract: Existing evidence suggests that extra grant revenues lead to little improvements in public services in developing countries - but would governments spend tax revenues di erently? This paper considers a program that invests in the tax capacity of Brazilian municipalities. Using variations in the timing of program uptake I nd that it raises local tax revenues and that the increase in taxes is used to improve both the quantity and quality of municipal education infrastructure. In contrast increases in grants over which municipalities have the same discretion as over taxes have no impact on any measure of local public infrastructure. These results suggest that the way governments are nanced matters: governments spend increases in tax revenues more towards expenditures that bene t citizens than increases in grant revenues.
    Keywords: JEL Classification:
    Date: 2016

This nep-pub issue is ©2016 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.