nep-pub New Economics Papers
on Public Finance
Issue of 2017‒08‒13
five papers chosen by

  1. Business Taxation and Wages: Redistribution and Asymmetric Effects By Thomas K. Bauer; Tanja Kasten; Lars-H. R. Siemers
  2. The Structure of State Corporate Taxation and its Impact on State Tax Revenues and Economic Activity By Juan Carlos Suárez Serrato; Owen M. Zidar
  3. Consumption and Income Inequality in the U.S. Since the 1960s By Bruce D. Meyer; James X. Sullivan
  4. Where Does the Good Shepherd Go? Civic Virtue and Sorting into Public Sector Employment By Omar Adam Ayaita; Filiz Gülal; Philip Yang
  5. Effective marginal and average tax rates in the 2017 Italian tax-benefit system for individuals and household By Fernando Di Nicola; Melisso Boschi; Giorgio Mongelli

  1. By: Thomas K. Bauer (Ruhr-University Bochum and RWI Essen); Tanja Kasten (Deutsche Rentenversicherung Bund); Lars-H. R. Siemers (Siegen University)
    Abstract: Empirical evidence on the degree of business-tax shifting is rare. It remains open to which extent the tax burden is shifted, whether there are differences for tax increases and decreases, or whether there exists some treatment heterogeneity. Using a large administrative panel data set, we exploit the regional variation of the German business-income taxation and find that 65% to at most 93% is shifted to labour through real wage adjustments. We find that business taxation increases wage inequality significantly. Workers in a weak labour-market position bear the highest part of business taxation. The incidence effect of tax reliefs is significantly higher than that of tax increases. Therefore, reducing business taxes might, surprisingly, effectively reduce inequality.
    Keywords: tax incidence, profit taxation, wages, inequality, asymmetric effects
    JEL: H22 H25 H32 J31 J38
    Date: 2017
  2. By: Juan Carlos Suárez Serrato; Owen M. Zidar
    Abstract: This paper documents facts about the state corporate tax structure — tax rates, base rules, and credits — and investigates its consequences for state tax revenue and economic activity. We present three main findings. First, tax base rules and credits explain more of the variation in the state corporate tax revenue than tax rates do. Second, although states typically do not offset tax rate changes with base and credit changes, the effects of tax rate changes on tax revenue and economic activity depend on the breadth of the base. Third, as states have narrowed their tax bases, the relationship between tax rates and tax revenues has diminished. Overall, changes in state tax bases have made the state corporate tax system more favorable for corporations and are reducing the extent to which tax rate increases raise corporate tax revenue.
    JEL: H2 H25 H71 R5
    Date: 2017–08
  3. By: Bruce D. Meyer; James X. Sullivan
    Abstract: Official income inequality statistics indicate a sharp rise in inequality over the past five decades. These statistics do not accurately reflect inequality because income is poorly measured, particularly in the tails of the distribution, and current income differs from permanent income, failing to capture the consumption paid for through borrowing and dissaving and the consumption of durables such as houses and cars. We examine income inequality between 1963 and 2014 using the Current Population Survey and consumption inequality between 1960 and 2014 using the Consumer Expenditure Survey. We construct improved measures of consumption, focusing on its well-measured components that are reported at a high and stable rate relative to national accounts. While overall income inequality (as measured by the 90/10 ratio) rose over the past five decades, the rise in overall consumption inequality was small. The patterns for the two measures differ by decade, and they moved in opposite directions after 2006. Income inequality rose in both the top and bottom halves of the distribution, but increases in consumption inequality are only evident in the top half. The differences are also concentrated in single parent families and single individuals. Although changing demographics can account for some of the changes in consumption inequality, they account for little of the changes in income inequality. Consumption smoothing cannot explain the differences between income and consumption at the very bottom, but the declining quality of income data can. Asset price changes likely account for some of the differences between the measures in recent years for the top half of the distribution.
    JEL: H23 H53 I3 I31 I32 I38
    Date: 2017–08
  4. By: Omar Adam Ayaita (University of Tuebingen, LEAD Graduate School & Research Network); Filiz Gülal (Paderborn University); Philip Yang (University of Tuebingen, LEAD Graduate School & Research Network)
    Abstract: Several studies have analyzed different motives to work in the public versus private sector. Some studies focus on prosocial motivation, others focus on need for security (risk aversion). However, the study of prosocial motivation in the context of public sector employment has largely focused on altruism and neglected other forms of prosocial motivation, in particular civic virtue, the motive to contribute to the society. In addition, it is unclear whether the positive relationship between prosocial motivation and public sector employment is due to selection at the career start or socialization during the career. Our study extends the understanding of the motivational basis of public sector employment by considering civic virtue in addition to altruism and risk aversion and by investigating selection and socialization. Using a largely representative, longitudinal data set of employees in Germany including 63,101 observations of 13,673 different individuals, we find that civic virtue relates positively to public sector employment beyond altruism and risk aversion. We find evidence on selection and no evidence on socialization as an explanation for this result. Our study offers important insight into the motivational basis of public versus private sector employment and has implications for employers’ attempts to attract and retain suitable employees.
    Keywords: Civic virtue, engagement, prosocial motivation, public sector employment, selection, socialization
    JEL: H0 H1 J45 M5
    Date: 2017–07
  5. By: Fernando Di Nicola (MEF, Department of Finance); Melisso Boschi (Senate of the Republic of Italy, Budget Committee Secretariat); Giorgio Mongelli (MEF, Department of Finance)
    Abstract: The personal income tax influences, through marginal and average tax rates, income redistribution, labour supply, and tax evasion. In this paper we present, for the main taxpayer types and income levels the statutory and implicit tax rates generated by the Italian personal income tax-benefit system components (social contributions, personal income tax, income type deductions, family-related deductions, family allowance, local surtaxes, and the "80 euro monthly bonus") along with the effective marginal tax rates deriving from their interaction. These tax rates are computed both for hypothetical taxpayer types (employee, retiree, selfemployed with and without dependent family members) and using a microsimulation model with a representative sample. The results show that the Italian tax-benefit system generates a broad range of effective marginal tax rates, with positive and negative values, determining, in some cases, also a "poverty trap" (that is a marginal tax rate higher than 100 percent). The marginal and average tax rates are also sometimes decreasing with growing taxable income, while at a low level of income we have such high tax rates that a disincentive for labour supply may result. With this evidence, a correction of the Italian tax-benefit system appears desirable both to preserve a more efficient income redistribution as well as labour supply incentives.
    Keywords: Personal income tax, effective marginal tax rates, average tax rates, income redistribution, labour supply
    JEL: H21 H24 H31
    Date: 2017–08

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