nep-pub New Economics Papers
on Public Finance
Issue of 2017‒10‒29
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets By Diane Aubert; Mireille Chiroleu-Assouline
  2. Tax Refunds and Income Manipulation Evidence from the EITC By Buhlmann, Florian; Elsner, Benjamin; Peichl, Andreas
  3. Tax Overhaul Risks Making the US Tax and Transfer System (Even) More Regressive By Jacob Funk Kirkegaard
  4. Petroleum Tax Competition Subject ot Capital Rationing By Petter Osmundsen; Kjell Løvås; Magne Emhjellen

  1. By: Diane Aubert; Mireille Chiroleu-Assouline
    Abstract: This paper investigates the distributional and efficiency consequences of an environmental tax reform, when the revenue from the green tax is recycled by varying labor tax rates. We build a general equilibrium model with imperfect heterogeneous labor markets, pollution consumption externalities, and non-homothetic preferences (Stone-Geary utility). We show that in the case where the reform appears to be regressive, the gains from the double dividend can be made Pareto improving by using a redistributive non-linear income tax if redistribution is initially not too large. Moreover, the increase of progressivity acts on unemployment and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for three European countries featuring different labor market behaviors. We show that a double dividend may be obtained without worsening the initial inequalities if the green tax revenues are redistributed with a progressivity index lower for UK than for France and Germany.
    Keywords: environmental tax reform, heterogeneity, unemployment, welfare analysis, tax progressivity
    JEL: D62 D63 H23 Q52 Q58
    Date: 2017
  2. By: Buhlmann, Florian (ZEW Mannheim); Elsner, Benjamin (IZA); Peichl, Andreas (Ifo Institute for Economic Research)
    Abstract: Welfare programs are important for reducing poverty but create incentives for recipients to maximize their income by either reducing labor supply or manipulating taxable income. In this paper, we quantify the extent of such behavioral responses for the Earned Income Tax Credit (EITC) in the US. We exploit that US states can set top-up rates, which means that, at a given point in time, workers with the same income receive different tax refunds in different states. Using event studies as well as a border pair design, we document that a raise in the state-EITC leads to more bunching of self-employed tax filers at the first kink point of the tax schedule. While we document a strong relationship up until the Great Recession in 2007, we find no effect thereafter. These findings point to important behavioral responses to what is the largest welfare program in the US.
    Keywords: EITC, tax refunds, income manipulation
    JEL: H20 H24
    Date: 2017–09
  3. By: Jacob Funk Kirkegaard (Peterson Institute for International Economics)
    Abstract: US policymakers should be particularly concerned about the effects of any new tax legislation on the incomes of individuals and businesses because of rising income inequality in the United States and the relatively limited US social safety net financed with government taxes. The evidence gathered in this Policy Brief shows that among the world’s high-income countries, the United States has the least redistributive government tax and transfer system, mainly because it chooses to redistribute relatively less through direct tax collection and government transfers to low-income American families. Therefore, any proposed revenue generation measures involving federal value-added taxes or general sales taxes, unless supplemented with increases in government transfers or designed to be less regressive, will only worsen income inequality in 21st century America.
    Date: 2017–10
  4. By: Petter Osmundsen; Kjell Løvås; Magne Emhjellen
    Abstract: The recent dramatic fall in oil prices has led to extensive capital rationing in international oil companies, and subsequent fierce competition between resource extraction countries to attract scarce investment. This situation is not adequately addressed by the large literature on international taxation and multinational companies, since it fails to take account of capital rationing in its assumption that companies sanction all projects with a positive net present value. The paper examines the effect of tax design on international capital allocation when companies ration capital. We analyse capital allocation and government take for four equal oil projects in three different fiscal regimes: the US GoM, UK upstream and Norway offshore. Implications for optimal tax design are discussed.
    Keywords: taxation, international companies, project metrics, project valuation, oil projects
    JEL: H21 H25 F23 Q40 G12 G31
    Date: 2017

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