nep-pub New Economics Papers
on Public Finance
Issue of 2018‒12‒10
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Tax Reform Made Me Do It! By Michelle Hanlon; Jeffrey L. Hoopes; Joel Slemrod
  2. Macroeconomics with Endogenous Markups and Optimal Taxation By Federico Etro
  3. A DSGE Model to Evaluate the Macroeconomic Impacts of Taxation By José Alves
  4. Evolutionary tax evasion and optimal regulation By Domenico De Giovanni; Fabio Lamantia; Mario Pezzino
  5. The role of Ombudsman Institutions in Open Government By Katharina Zuegel; Emma Cantera; Alessandro Bellantoni
  6. Determinants of tax revenues: Evidence from a sample of Lower Middle Income countries By BOUKBECH, Rachid; BOUSSELHAMI, Ahmed; EZZAHID, Elhadj
  7. Optimal Carbon Pricing and Income Taxation Without Commitment By Alex Schmitt
  8. Second Thoughts on Estimating Expansionary Fiscal Policy E ffects in the United States By JIA, BIJIE
  9. Limiting the distortionary impacts of transaction taxes: Scottish stamp duty after the Mirrlees Review By Daniel Borbely

  1. By: Michelle Hanlon; Jeffrey L. Hoopes; Joel Slemrod
    Abstract: This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, we examine four different outcomes—bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. We find that 4% of public firms in our sample announced in Q1 2018 they would pay some portion of their tax savings toward workers. In terms of investment, we find that 22% of the S&P 500 firms in our sample mentioned in earnings conference calls that they would increase investment because of the TCJA. We find a general increase in share repurchases following the passage of the TCJA, but the increase is extremely concentrated in a small number of firms. We find only nine firms that announced a new share repurchase plan explicitly attributed the new plan to the TCJA. In regression analysis, we find that both political and economic variables explain TCJA-linked announcements. The analysis suggests that firms with greater expected tax savings from the TCJA are those most likely to announce payments to workers and plans to increase investment. Firms with a Political Action Committee that donates more to Republican candidates are also more likely to announce benefits to employees.
    JEL: H20 H24 H25
    Date: 2018–11
  2. By: Federico Etro
    Abstract: We augment a flexible price dynamic general equilibrium model with any symmetric intratemporal preferences over a variety of goods supplied under monopolistic, Bertrand or Cournot competition to derive implications for business cycle and market inefficiencies. Endogenous markups can magnify the impact of shocks on consumption and labor supply through intertemporal substitution mechanisms, and the optimal fiscal policy requires a variable labor income subsidy and a capital income tax that converges to zero in the long run. With an endogenous number of goods and strategic interactions, also entry affects markups and the optimal fiscal policy requires also a tax on profits. We characterize equilibrium and efficient market structures and derive optimal tax rules for a variety of preferences, including a new type of general additive preferences that nest direct, indirect, implicit and homothetic additivity
    Keywords: Business cycles, Monopolistic competition, Optimal taxation, variable markups.
    JEL: E1 E2 E3
    Date: 2018
  3. By: José Alves
    Abstract: As recognized, taxation is not only an instrument for government to collect revenues from the economic agents but also an instrument of fiscal policy to influence the agents’ behaviour. In this work, we develop a DSGE model to assess the macroeconomic impact of three tax items (taxes on individual income, on firms’ income and on consumption) on the dynamics of both individual tax items and on the aggregate revenues as well. Moreover, we also intend to evaluate how macroeconomic aggregates behave in a presence of stochastic shocks in taxation.
    Keywords: DSGE models; Tax effects; Fiscal Policy; Optimal taxation
    JEL: D58 E62 H21 H30
    Date: 2018–11
  4. By: Domenico De Giovanni; Fabio Lamantia; Mario Pezzino
    Date: 2018
  5. By: Katharina Zuegel; Emma Cantera; Alessandro Bellantoni
    Abstract: Ombudsman institutions (OIs) act as the guardians of citizens’ rights and as a mediator between citizens and the public administration. While the very existence of such institutions is rooted in the notion of open government, the role they can play in promoting openness throughout the public administration has not been adequately recognized or exploited. Based on a survey of 94 OIs, this report examines the role they play in open government policies and practices. It also provides recommendations on how, given their privileged contact with both people and governments, OIs can better promote transparency, integrity, accountability, and stakeholder participation; how their role in national open government strategies and initiatives can be strengthened; and how they can be at the heart of a truly open state.
    Keywords: access to information, accountability, ombudsman, open government, open state, participation
    JEL: H4 H7 H83
    Date: 2018–12–07
  6. By: BOUKBECH, Rachid; BOUSSELHAMI, Ahmed; EZZAHID, Elhadj
    Abstract: Our goal in this paper is to explore the determinants of tax revenues in developing countries. After reviewing the main determinants discussed in economic literature, two models are estimated in a panel including 29 lower middle income countries over the period 2001-2014. The first concerns the tax capacity and the second the tax effort. The results show that per capita GDP and the value added of agriculture are significantly and positively correlated with tax revenues. The degree of openness has a positive but insignificant effect on tax revenues. The impact of population growth rate is negative but not significant. For the determinants of tax effort, the impacts of inflation and public spending are significant and positive. The relationship between the tax effort and the variables "public aid received" and "foreign debt" is significantly negative.
    Keywords: Tax revenues, tax capacity, tax effort, developping countries
    JEL: H2 O1 O2
    Date: 2018–11–21
  7. By: Alex Schmitt
    Abstract: At what rate should a government price carbon emissions? This paper analyzes optimal carbon pricing while taking into account interactions with the taxation of labor and capital income. In an otherwise standard climate-economy model, the policy maker has to resort to a distortionary tax on labor and capital income, and is unable to commit to future policies. I show that the optimal time-consistent carbon price is in general not at its Pigouvian level, that is, at the level of marginal damages induced by climate change. This is due to the presence of costs and benefits of emitting carbon that only materialize in the presence of income taxes. Quantitatively, I find that in a standard calibration of the model, this tax-interaction effect accounts for deviation of the optimal tax from the level of marginal climate damages in the ballpark of 10%, due to the second-best effects partially offsetting each other. Compared to a setting with lump-sum income taxes, I observe a smaller optimal carbon price without commitment, with the average differences over time amounting to 14%.
    Keywords: Climate-economy modeling, carbon tax, optimal income taxation
    JEL: E61 E62 H21 H23 Q54
    Date: 2018
  8. By: JIA, BIJIE
    Abstract: This paper revisits mixed findings of the expansionary fiscal spending effect in the United States. An array of standard Vector-Autoregressive (VAR) models has been implemented to capture inconsistent effects of the fiscal expansion. Findings in this paper consistently reveal that without considering the influence of transfer payments, state and local government spending, and the timing of sample, measuring the effect of expanded government purchases along would result in an upward bias of the comprehensive fiscal stimulus effect. This paper questions the validity of using government purchases alone to precisely evaluate the effect of fiscal expansion.
    Keywords: E21; E32; E62; H30; H50.
    JEL: E21 E32 E62 H30 H50
    Date: 2018–10
  9. By: Daniel Borbely (Department of Economics, University of Strathclyde)
    Abstract: We investigate the distortionary impacts of transaction taxes through a case study of the Scottish property market. We make use of three sources of variation in transaction tax rates present in recent Scottish tax systems, price notches, time notches and a shift to a more progressive transaction tax regime. Our results indicate that both kinds of notches have a distortionary impact that is sub-optimal. The Scottish Government's recent reforms had a positive impact through removal of the price notches but time notches re-emerged allowing other distortions to persist. Using variation in effective tax rates from a progressive reform of the transaction tax system, we also find that the permanent effect of increased tax rates is a reduction in transaction activity. Looking across the price distribution, our results indicate that the strongest permanent responses occur in price ranges where tax rates fell due to the reform. This suggests that if governments insist on keeping transaction tax regimes, progressive taxation might be a good way to limit their distortionary impact, whilst also encouraging transaction activity in the lower end of the market.
    Keywords: transaction taxes, property markets, behavioural responses to taxation, notches in the tax systems
    JEL: H21 H26 H30
    Date: 2018–11

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