nep-pub New Economics Papers
on Public Finance
Issue of 2017‒06‒11
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Valuing Public Goods More Generally: The Case of Infrastructure By David Albouy; Arash Farahani
  2. Tax Advantages and Imperfect Competition in Auctions for Municipal Bonds By Daniel Garrett; Andrey Ordin; James W. Roberts; Juan Carlos Suárez Serrato
  3. Shifting priorities in EU tax policies By Sarah Godar; Achim Truger
  4. Beggar-Thy-Neighbour Tax Cuts: Mobility after a Local Income and Wealth Tax Reform in Switzerland By MARTINEZ Isabel
  5. Democratisation and tax structure: Greece versus Europe from a historical perspective By Pantelis Kammas; Vassilis Sarantides

  1. By: David Albouy (University of Illinois); Arash Farahani (University of Illinois)
    Abstract: We examine the relationship between local public goods, prices, wages, and population in an equilibrium inter-city model. Non-traded production, federal taxes, and imperfect mobility all affect how public goods (or “amenities” more broadly) should be valued from data. Reinterpreting the estimated effects of public infrastructure on prices and wages in Haughwout (2002), we find infrastructure over twice as valuable with our more general model. New estimates based on more years, cities, and data-sets indicate stronger wage and positive population effects of infrastructure. These imply higher values of infrastructure to firms, and also to households if moving costs are substantial.
    Keywords: Infrastructure, public goods, capitalization, valuation, nontraded goods, federal taxation, imperfect mobility
    JEL: H54 H2 H4 J3 R2
    Date: 2017–03
  2. By: Daniel Garrett; Andrey Ordin; James W. Roberts; Juan Carlos Suárez Serrato
    Abstract: We show that the effect of tax advantages of municipal bonds on the market microstructure of municipal bond auctions is a crucial determinant of state and local governments’ borrowing costs. Reduced-form estimates show that increasing the tax advantage by 3 pp. lowers mean borrowing costs by 9-10%, consistent with a greater than-unity passthrough elasticity. Non-parametric evidence shows that strategic participation and bidding in imperfectly-competitive auctions generates this greater-than-unity passthrough. Using a structural auction model to evaluate the efficiency of Obama and Trump administration proposals, we find that the reduction in municipal borrowing costs is 2.8-times the revenue cost of the tax advantage.
    JEL: D44 H71 L13
    Date: 2017–06
  3. By: Sarah Godar; Achim Truger
    Abstract: Budgetary pressures and the debate on increasing inequality caused by the global financial and economic crisis have also revived public and scholarly interest in tax policies. While some international coordination attempts aim at a more effective enforcement of existing tax laws, a number of individual country reforms have also changed the national tax structures in EU member states. The study provides a summary of tax policy trends in the EU and gives a rough overview of tax reforms in the areas of income and corporate taxes, wealth-related taxes and consumption taxes since the 1980s with an emphasis on new developments since 2008. In some aspects, recent tax policy choices deviate from the trends of the last decades which were characterized by declining top tax rates and tax privileges for capital income. Still, one cannot speak of a progressive turn of tax policy in the EU. The tax burden increased also for low and middle income groups, in some cases in the form of surcharges on the income tax, but in the majority of member states in the form of increased consumption taxes. Equity considerations might have played a role in recent reforms, and a contribution by high income groups might have been regarded as unavoidable. However, governments have refrained from substantial redistributive reforms, the more so as top tax rate increases were temporary in many cases whereas VAT increases were not.
    Date: 2017
  4. By: MARTINEZ Isabel
    Abstract: This paper analyzes mobility responses to a large, regressive local income tax cut benefiting the top 1% in the Swiss Canton of Obwalden in 2006. DiD estimations comparing Obwalden with neighboring cantons confirm that the reform was successful in increasing the share of rich taxpayers in the canton (+20-30%). Using individual tax data, I find a large elasticity of the inflow of rich taxpayers with respect to the average net-of-tax rate ranging from 3.2 to 6.5. DiD estimates of cantonal revenue, however, show that the tax cuts did not lead to an increase in cantonal tax revenue per capita. This is in line with a theoretical analysis suggesting Obwalden was not on the wrong side of the Laffer curve before the reform.
    Keywords: Mobility; Personal income tax; Tax competition; Local taxes; Regressive income tax
    JEL: H31
    Date: 2017–05
  5. By: Pantelis Kammas; Vassilis Sarantides
    Abstract: Building on a unique dataset that contains 13 different tax categories of the Greek state over the period 1833-1933, this paper studies the effect of democratisation on the size and the composition of tax revenues. Empirical analysis suggests that the radical reform that enfranchised all adult males in Greece in 1864 did not affect the level of taxation, but did exert a significant impact on its structure. Universal male suffrage was accompanied by an amazing reduction in rural taxes (e.g., taxes on land) and remarkable increases in indirect taxes – mostly in custom and excises duties. These findings clearly indicate that there were political economy motives behind this shift in the implemented fiscal policy. In particular, the Greek governments changed the structure of taxation in order to satisfy the large majority of the electorate, who were peasants and farmers, ensuring a minimum level of social cohesion. Using also a sample of 12 Western European countries over the same period, we show that the phase of economic development induced a differentiated effect of democratisation on the size and the structure of taxation.
    Keywords: democracy, tax structure, fiscal capacity
    Date: 2017–05

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