nep-pub New Economics Papers
on Public Finance
Issue of 2017‒10‒01
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Income Taxation with Composition Effects By Jacquet, Laurence; Lehmann, Etienne
  2. "Does Voluntary Tax Compliance Increase After Granting Tax Amnesty?" By I Made Sudarma
  3. Taxing consumption to mitigate carbon leakage By Kaushal, Kevin R.; Rosendahl, Knut Einar
  4. Broken Tax Breaks? Evidence from a Tax Credit Information Experiment with 1,000,000 Students By Bergman, Peter; Denning, Jeffrey T.; Manoli, Dayanand

  1. By: Jacquet, Laurence (Norwegian School of Economics); Lehmann, Etienne (CRED, Université Panthéon Assas Paris 2)
    Abstract: We study the optimal nonlinear income tax problem with multidimensional individual characteristics on which taxes cannot be conditioned. We obtain an optimal tax formula that generalizes the standard one by averaging, with specific weights, the sufficient statistics of individuals who earn the same income. Our first main contribution consists in showing that multidimensional heterogeneity brings a new source of endogeneity to the sufficient statistics that we call composition effects. We highlight that composition effects may substantially affect optimal marginal tax rates. Our results put the stress on the need for empirical studies on sufficient statistics for different demographic groups e.g., according to gender, age, ethnicity. As a second main contribution, we show the equivalence between the tax perturbation and mechanism design approaches which bridges the gap between both methods that have, so far, been used separately in the literature.
    Keywords: optimal taxation, multidimensional screening problems, tax perturbation, allocation perturbation, sufficient statistics
    JEL: H21
    Date: 2017–09
  2. By: I Made Sudarma (Brawijaya University, Indonesia Author-2-Name: I Nyoman Darmayasa Author-2-Workplace-Name: Bali State Polytechnic, Indonesia)
    Abstract: "Objective – The main objective of this study is to explore the meaning of voluntary tax compliance by a person after they are granted tax amnesty. Methodology/Technique – This research is qualitative research and uses a transcendental phenomenology method. Findings – The results show that tax compliance does not automatically increase after a grant of tax amnesty. The reason for this is the fact that taxpayers wish to avoid being tax audited. Tax amnesty is therefore not yet useful in build trust in the tax authority. Tax authorities need to convince the public that tax amnesty creates justice for all taxpayers. The power of the tax authority is useful to strengthen law enforcement measures. Furthermore, fundamental moral and ethical considerations based on internalization, spirituality and religion tend to improve taxpayers’ honesty. Novelty – The trust and power of a tax authority that is in line with taxpayers’ honesty is fundamental voluntary to tax compliance. The results of this research demonstrate the need for new tax policies to increase voluntary tax compliance."
    Keywords: Moral Ethics; Tax Amnesty; Transcendental Phenomenology; Trust; Voluntary Tax Compliance.
    JEL: H20 H21 M41
    Date: 2017–07–07
  3. By: Kaushal, Kevin R. (School of Economics and Business, Norwegian University of Life Sciences); Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: Unilateral actions to reduce CO2 emissions could lead to carbon leakage such as relocation of emission-intensive and trade-exposed industries (EITE). To mitigate such leakage, countries often supplement an emissions trading system (ETS) with free allocation of allowances to exposed industries, e.g. in the form of output-based allocation (OBA). This paper examines the welfare effects of supplementing OBA with a consumption tax on EITE goods. In particular, we investigate the case when only a subset of countries involved in a joint ETS introduces such a tax. The analytical results suggest that the consumption tax would have unambiguously global welfare improving effects, and under certain conditions have welfare improving effects for the tax introducing country as well. Numerical simulations in the context of the EU ETS support the analytical findings, including that the consumption tax is welfare improving for the single country that implements the tax.
    Keywords: Carbon leakage; Output-based allocation; Consumption tax
    JEL: D61 F18 H23 Q54
    Date: 2017–09–21
  4. By: Bergman, Peter (Columbia University); Denning, Jeffrey T. (Brigham Young University); Manoli, Dayanand (University of Texas at Austin)
    Abstract: There is increasing evidence that tax credits for college do not affect college enrollment. This may be because prospective students do not know about tax benefits for credits or because the design of tax credits is not conducive to affecting educational outcomes. We focus on changing the salience of tax benefits by providing information about tax benefits for college using a sample of over 1 million students or prospective students in Texas. We sent emails and letters to students that described tax benefits for college and tracked college outcomes. For all three of our samples – rising high school seniors, already enrolled students, and students who had previously applied to college but were not currently enrolled – information about tax benefits for college did not affect enrollment or reenrollment. We test whether effects vary according to information frames and found that no treatment arms changed student outcomes. We conclude that salience is not the primary reason that tax credits for college do not affect enrollment.
    Keywords: tax benefits for college
    JEL: I22 I23 H2
    Date: 2017–09

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