nep-pub New Economics Papers
on Public Finance
Issue of 2017‒12‒11
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Literature review on taxation, entrepreneurship and collaborative economy By Dondena; CASE; IEB; PWC
  2. Income vs. property tax competition: A normative comparison By Florian Kuhlmey
  3. Local income tax competition with progressive taxes and a fiscal equalization scheme By Florian Kuhlmey
  4. Fiscal Consolidation Programs and Income Inequality By Brinca, Pedro; Ferreira, Miguel; Franco, Francesco; Holter, Hans; Malafry, Laurence
  5. The Benefits and Costs of Donor Advised Funds By James Andreoni
  6. Analyzing tax reforms using the Swedish Labour Income Microsimulation Model By Lundberg, Jacob
  7. The distribution of taxable income and fiscal benefits in Spain: New evidence from personal income tax returns (2002-2011) By David Haugh

  1. By: Dondena; CASE; IEB; PWC
    Abstract: This study provides a comprehensive review of the theoretical and empirical economic literature on tax and entrepreneurship, taking also into account a number of open, tax-related questions raised by the changing nature of entrepreneurship, symbolised by the growing importance of the collaborative economy
    Keywords: taxation, innovation, digital, entrepreneurship, collaborative economy
    JEL: H24 H25 L86 O32 O33
    Date: 2017–11
  2. By: Florian Kuhlmey (University of Basel)
    Abstract: Income and property taxation are among the most prevalent policy instruments to nance local expenditure in countries with a high degree of decentralization. However, little is known about their relative eciency and redistributive properties. This paper compares both tax instruments within the same framework and investigates their relative attractiveness to nance local expenditure. It further allows for inter-municipal spillovers and rivalry in the consumption of the publicly provided good. The analytical model identi es the di erent ineciencies in both tax regimes which include intra- and inter-municipal free-riding. In a numerical illustration, the model is solved for the resulting equilibria. This allows to quantify the gross welfare loss from decentralization and also reveals a decomposition of the welfare loss into its components.
    Keywords: Tax competition; normative analysis; income taxation; property taxation; segregation; decentralization; welfare decomposition.
    JEL: H3 H7 R1 R2
    Date: 2017
  3. By: Florian Kuhlmey (University of Basel)
    Abstract: This paper develops a model of local income tax competition with a progressive tax scheme and a built-in scal equalization scheme. Both aspects are central to policy makers: The progressivity for equity reasons, and the scal equalization to prevent a race to the bottom and to limit the degree of segregation of households according to income. The model is calibrated to the metropolitan area of Zurich (Switzerland), and policy evaluations reveal that a progressive tax scheme as the basis for local tax competition causes strong segregating forces that can only to some extent be compensated by the scal equalization scheme.
    Keywords: Tax competition; income taxation; fiscal equalization; progressive taxation; segregation.
    JEL: H3 H7 R1 R2
    Date: 2017
  4. By: Brinca, Pedro (Center for Economics and Finance); Ferreira, Miguel (Nova School of Business and Economics); Franco, Francesco (Nova School of Business and Economics); Holter, Hans (Department of Economics); Malafry, Laurence (Dept. of Economics, Stockholm University)
    Abstract: Following the Great Recession, many European countries implemented fiscal consolidation policies aimed at reducing government debt. Using three independent data sources and three different empirical approaches, we document a strong positive relationship between higher income inequality and stronger recessive impacts of fiscal consolidation programs across time and place. To explain this finding, we develop a life-cycle, overlapping generations economy with uninsurable labor market risk. We calibrate our model to match key characteristics of a number of European economies, including the distribution of wages and wealth, social security, taxes and debt, and study the effects of fiscal consolidation programs. We find that higher income risk induces precautionary savings behavior, which decreases the proportion of credit-constrained agents in the economy. Credit-constrained agents have less elastic labor supply responses to fiscal consolidation achieved through either tax hikes or public spending cuts, and this explains the relationship between income inequality and the impact of fiscal consolidation programs. Our model produces a cross-country correlation between inequality and the fiscal consolidation multipliers, which is quite similar to that in the data.
    Keywords: Fiscal Consolidation; Income Inequality; Fiscal Multipliers; Public Debt; Income Risk
    JEL: E21 E62 H31 H50
    Date: 2017–11–27
  5. By: James Andreoni
    Abstract: Donor Advised Funds (DAFs) are now a major source of charitable donations in the US, responsible for 1 in 10 dollars donated to charity in 2015. In 2016, Fidelity Charitable, whose only mission is to provide DAFS, became the largest charity in the US. Paradoxically, most people have never heard of DAFs or Fidelity Charitable. This leads us to ask, who uses DAFs and why, what is the impact of government tax policy toward DAFs, and could the extra fiscal cost of subsidizing DAFs be balanced out by an extra public gain of new charity resulting from tax policy toward DAFs?
    JEL: H2 H24 H26 H3
    Date: 2017–10
  6. By: Lundberg, Jacob (Department of Economics)
    Abstract: Labour income taxation is a central policy topic because labour income makes up the majority of national income and most taxes are in the end taxes on labour. In order to quantify how behavioural responses of labour income earners affect tax revenue, the Swedish Labour Income Microsimulation Model (SLIMM) is constructed and used to evaluate tax reforms. The model simulates taxable income responses, participation responses and income effects. Elasticities are calibrated to match midpoints of estimates found in the quasiexperimental literature. SLIMM is solidly microfounded and uses administrative register data. The model is used to analyze changes to the earned income tax credit (EITC), municipal income taxes and the central government income tax paid by high-income earners. The simulations indicate that the EITC has increased employment by 128,000 and has a degree of self-financing of 21 percent. Almost half of the revenue increase from higher municipal tax rates would disappear due to behavioural responses. Tax cuts for the richest fifth of working Swedes are completely self-financing.
    Keywords: income taxation; behavioural responses; dynamic scoring; microsimulation; tax reform
    JEL: H21 H24
    Date: 2017–11–07
  7. By: David Haugh
    Abstract: The personal tax system has a large influence on incentives to work, save and invest and hence growth. At the same time it is a key policy lever for income redistribution. This paper analyses how income distribution patterns changed in Spain before and after the crisis using the personal income tax samples constructed by the Spanish Institute of Fiscal Studies for the period 2002 to 2011. We find that the top and bottom of the income distribution gained the most from the boom period, and the bottom suffered proportionally more in the subsequent bust. Although Spain's average personal tax rates were above the OECD average, personal tax revenue as a share was below the OECD average. One reason for this is substantial fiscal benefits that significantly reduce total tax received by the government. We examine the distribution of the tax burden, and especially how income deciles benefit from the different fiscal benefits, namely tax exemptions, reductions and tax credits. This reveals that Spain's personal income tax system is progressive, especially for labour income, but far less so for capital income. Some fiscal benefits, notably the tax credit on maternity, are highly progressive. Other fiscal benefits, mainly exemptions and reductions, are regressive. These include the exemptions on renting and on the interest from investing in dwellings and the reduction for contributions to personal pension plans.
    Keywords: capital income, Income taxes, labour income, tax expenditures, tax rates
    JEL: D31 H23 H24
    Date: 2017–12–12

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