nep-pub New Economics Papers
on Public Finance
Issue of 2016‒10‒16
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Experimental Evidence on Tax Salience and Tax Incidence By Morone, Andrea; Nemore, Francesco; Nuzzo, Simone
  2. What is the Added Value of Preschool? Long-term Impacts and Interactions with a Health Intervention By Maya Rossin-Slater; Miriam Wüst
  3. The Policy and Politics of Reform of the Australian Goods and Services Tax By David Pearl
  4. Inter-regional disparities in the budget revenues per capita and their determinants: Russian case study By Marina Malkina
  5. How Sensitive is Irish Income Tax Revenue to Underlying Economic Activity? By Deli, Yota; Lambert, Derek; Lawless, Martina; McQuinn, Kieran; Morgenroth, Edgar
  6. Intergovernmental Fiscal Transfers and Tax Efforts: Evidence from Japan By Miyazaki, Takeshi
  7. Changes in the optimal tax rate in South Africa prior and subsequent to the global recession period By Motloja, Lehlohonolo; Makhoana, Tsholofelo; Kassoma, Rooyen; Houdman, Rozadian; Phiri, Andrew

  1. By: Morone, Andrea; Nemore, Francesco; Nuzzo, Simone
    Abstract: While a basic theoretical principle in public economics assumes that individuals’ behaviour is fully-optimizer with respect to the introduction of a tax, an increasing body of research is presenting evidence that agents decision making is often affected by non-negligible cognitive biases, which could be responsible for lower market performance as well as for deviations from standard theoretical predictions. This paper extends the latter strand of research focusing on two trend topics in public economics: tax salience and tax incidence. While the former refers to the prominence of the tax, the latter places emphasis on the statutory vs. factual division of tax payments. Is market performance affected by the salience of the tax? Is the incidence of a tax independent of which side of the market it is levied on (Liability Side Equivalence Principle, LES)? We address these questions through a laboratory experiment in which one unit of a fictitious good is traded through a double-auction market institution. Based on a panel data analysis, our contribution shows that a non-salient tax reduces both the allocational and informational efficiency of the market with respect to the instance in which the tax is salient. Moreover, we show that the Liability Side Equivalence Principle does not hold in practice.
    Keywords: Tax incidence,Tax salience,Liability Side Equivalence,choice behaviour,laboratory
    JEL: C91 H20 H21 H30
    Date: 2016
  2. By: Maya Rossin-Slater; Miriam Wüst
    Abstract: We study the impact of targeted high quality preschool over the life cycle and across generations, and examine its interaction with a health intervention during infancy. Using administrative data from Denmark together with variation in the timing of program implementation between 1933 and 1960, we find lasting benefits of access to preschool at age 3 on outcomes through age 65 -- educational attainment increases, income rises (for men), and the probability of survival increases (for women). Further, the benefits persist to the next generation, who experience higher educational attainment by age 25. However, exposure to a nurse home visiting program in infancy reduces the added value of preschool. The positive effect of preschool is lowered by 85 percent for years of schooling (of the first generation) and by 86 percent for adult income among men.
    JEL: H51 H53 I18 I3 J13
    Date: 2016–09
  3. By: David Pearl
    Abstract: In February this year, Prime Minister Turnbull took Goods and Services Tax (GST) reform off the table, but history would suggest it will come into play again. Consumption is simply too important a tax base to ignore if we want to improve our tax system. With that in mind, and in light of the recent GST debate, this article offers a dispassionate examination of the economics and politics of this tax. The popular myths and misconceptions about the GST are highlighted. The point is made that fairness objectives are better achieved in other ways, including through our progressive personal income tax system. The article concludes with a brief discussion of the barriers to GST reform. It suggests that there may be sound psychological reasons for resistance to change. The importance of trust is stressed in this connection. This is not a matter of keeping promises, but requires effective, credible and patient advocacy from would-be reformers.
    Date: 2016–10–10
  4. By: Marina Malkina (Lobachevsky State University of Nizhni Novgorod)
    Abstract: The aim of the research is evaluation of inter-regional disparities in budget revenues per capita and assessment of the factors influenced them in statics and dynamics, based on data of Russian Federation regions in 2004-2014. We proposed a four-factor multiplicative model of the formation of budget revenues per capita which describes the transition from GDP per capita to the collected taxes per capita, to the regionally-assigned tax revenues per capita after tax sharing between levels of the budget system and to the budget revenues per capita after intergovernmental transfers and budget loans. To assess the level of inter-regional differences at all these stages we employed the population-weighted Theil-Bernoulli index, which is the measure of entropy sensitive to the bottom-part distribution. By means of this index decomposition, first proposed by Duro J.A. and Esteban J., and its application to our multiplicative model, we assessed the impact of four main factors and three intersect factors on inequality in regions budgetary provision, both in panel data and in time series.
    Keywords: budget revenues per capita, inter-regional inequality, Theil-Bernoulli index, decomposition, convergence, divergence
    JEL: H61 H71 R12
  5. By: Deli, Yota; Lambert, Derek; Lawless, Martina; McQuinn, Kieran; Morgenroth, Edgar
    Date: 2016–09
  6. By: Miyazaki, Takeshi
    Abstract: The present study examines the incentiv¬e effects of fiscal equalization transfers on local corporate tax rates from theoretical and empirical perspectives. The study focuses on additional corporate tax on capital, which is exempt from calculations of equalization grants. A theoretical investigation reveals that a rise in equalization rate increases additional capital tax rates. The theoretical prediction is empirically examined using panel data of Japanese municipalities for 1990–2000. It is found that a higher equalization rate in fiscal equalizing transfers gives municipalities an incentive to raise corporate tax rates exempt from the transfer scheme.
    Keywords: Intergovernmental fiscal transfers; regression discontinuity design; tax competition; tax effort
    JEL: H7 H71 H77
    Date: 2016–10
  7. By: Motloja, Lehlohonolo; Makhoana, Tsholofelo; Kassoma, Rooyen; Houdman, Rozadian; Phiri, Andrew
    Abstract: Following the global recession period of 2009, much debate has been cast on the role of tax policy in improving economic growth in the South African economy. In our paper, we estimate optimal tax rates for South Africa using the optimization model of Scully (1996, 2003) applied to quarterly data collected for periods before the crisis (i.e. 1994:Q1 – 2009:Q2) and for periods after the crisis (2009:Q2 – 2016:Q2). We estimate our optimization model using the autoregressive distributive lag (ARDL) bounds test approach. Our empirical estimates reveal an insignificant relationship between taxation and economic growth for periods prior to the global recession period whereas we find a significant relationship for periods subsequent to the recession, with an optimal rate of tax being found to be 22 percent of GDP. These empirical results highlight that whilst tax policy had an insignificance effect on economic growth in South Africa before the recession of 2009, tax policy appears to play an important role in promoting short-run and long-run economic growth in the post-recession era. Furthermore, our results suggest that fiscal authorities should ensure that tax revenue as a share of GDP should do not exceed the optimal rate of 22 percent in the interest of attaining higher rates of economic growth.
    Keywords: Tax; Economic growth; Fiscal Policy; Optimal tax rate; Optimal government size; South Africa; Sub-prime crisis; Global recession
    JEL: C13 C32 C52 E62 H21 O40
    Date: 2016–10–07

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