nep-pub New Economics Papers
on Public Finance
Issue of 2019‒08‒12
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pareto-efficient Tax Deductions By Sebastian Koehne; Dominik Sachs
  2. Slippery slope framework, tax morale and tax compliance: a theoretical integration and an empirical assessment By Gaetano Lisi
  3. The Marriage Market, Inequality and the Progressivity of the Income Tax By Tim Obermeier
  4. Are environmental tax policies beneficial?: Learning from programme evaluation studies By Jonas Teusch; Nils Axel Braathen
  5. Samuelson Meets Federalism: Local Production of a National Public Good By Jan K. Brueckner; Steven G. Craig; Kangoh Lee
  6. Does Tax-Benefit Linkage Matter for the Incidence of Social Security Contributions? By Antoine Bozio; Thomas Breda; Julien Grenet
  7. CBO’s Projections of Federal Receipts and Expenditures in the National Income and Product Accounts: 2019 to 2029 By Congressional Budget Office
  8. The Median Voter Takes it All: Preferences for Redistribution and Income Inequality in the EU-28 By Colagrossi, Marco; Karagiannis, Stelios; Raab, Roman
  9. Labor supply, taxation and the use of the tax revenues: A real-effort experiment in Canada, France, and Germany By Keser, Claudia; Masclet, David; Montmarquette, Claude
  10. The Economics of Tobacco Control in Nigeria: Modelling the Fiscal and Health Effects of a Tobacco Excise Tax Change By Akanonu, Precious C.; Ishaku, Joseph; Onyekwena, Chukwuka

  1. By: Sebastian Koehne; Dominik Sachs
    Abstract: We analyze Pareto-efficient tax deduction rules for work-related expenses (e.g. housekeeping services, child care or elderly care). Pareto efficiency dictates a tight rule for how the rate of deductibility should vary with income and expenditures. An immediate implication is a recipe for designing Pareto-improving tax reforms. We apply our theory to housekeeping services in the U.S.: Introducing deduction rules such that between 55% (low expenses) and 85% (high expenses) of housekeeping services can be marginally deducted from taxable income yields a Pareto improvement if combined with a slight increase in marginal tax rates. Nobody is made worse-off and tax revenue increases by 20 Dollars per capita.
    Keywords: optimal taxation, tax deduction, Pareto-improving tax reform
    Date: 2019
  2. By: Gaetano Lisi (University of Cassino)
    Abstract: Many empirical works confirmed the capacity of the "slippery slope" framework and tax morale in explaining tax compliance. So far, however, very few studies tried to fully integrate these two main behavioral approaches to understanding tax compliance. Indeed, a theoretical underpinning is still missing. In this paper, therefore, we first introduce tax morale and the “slippery slope” framework into an economic model of taxpayer’s behavior and then we test it empirically. We find that for increasing overall tax compliance, voluntary tax compliance (trust and tax morale) is more effective than enforced tax compliance. Eventually, from a policy point of view, we suggest a strategy based on rewards for honest taxpayers.
    Keywords: tax compliance, tax evasion, voluntary tax compliance, tax morale, enforced tax compliance
    JEL: H26 H3 K42 D22
    Date: 2019–07
  3. By: Tim Obermeier
    Abstract: This paper studies how the progressivity of the income tax affects intra-household inequality and the marriage market. Tax progressivity increases the after-tax earnings of the lowerearning spouse and improves their bargaining position in marriage. This mechanism reduces inequality in consumption and leisure within households. In addition, tax progressivity can change who is single and who marries whom. I study these effects in an equilibrium search and matching model with intra-household bargaining, labor supply and savings. The model is calibrated to data from the Netherlands and used to study a hypothetical reform which increases progressivity by 40% relative to the current system. The reduction of intra-household inequality accounts for 24.77% of the reduction in inequality in private consumption due to the reform, and 11.43% of the reduction in inequality in utility from private and public consumption, leisure and home production. Changes in the composition of couples and singles, due to endogenous marriage and divorce, have small implications for inequality.
    Keywords: Tax Progressivity, Intra-Household Bargaining, Equilibrium search, Assortative matching
    JEL: H20 E21 J12
    Date: 2019–07
  4. By: Jonas Teusch (OECD); Nils Axel Braathen (OECD)
    Abstract: This paper provides a concrete example of how policy analysts can use empirical programme evaluation studies to perform ex-post assessments of environmentally related tax policies. A number of studies credibly identify causal effects of environmentally related tax policies, but do not necessarily provide all the information needed to fully inform the policy-making process. This paper argues that cost-benefit analysis (CBA) could enrich ex-post assessments of environmentally related tax policies, given that CBA provides decision makers with a broader perspective of social costs and benefits and allows the identification of potential trade-offs among policy objectives.
    Keywords: Bonus/malus policies, Cost-benefit analysis, Environmental Taxes, Feebates, Quantitative Policy Evaluation, Vehicle Purchase Taxes
    JEL: D61 D62 H23 H31
    Date: 2019–08–12
  5. By: Jan K. Brueckner; Steven G. Craig; Kangoh Lee
    Abstract: This paper studies an overlooked phenomenon in the provision of public goods: local produc-tion of a national public good, such as the manufacture of fighter planes (which contribute to national defense) in many different jurisdictions across the country. Because local production of the national good raises local incomes, each jurisdiction seeks to raise its share of the good’s production. A subset of jurisdictions then forms a minimum winning coalition, which offers equal production shares to its members and smaller (possibly zero shares) to non-members, while choosing the provision level of the national good. The outcome is inefficient, with produc-tion inefficiently concentrated and the public good also overprovided (because income benefits reducing the good’s perceived marginal cost). Empirical results confirm the prediction that the location of production is important in determining Congressional support for federal program spending.
    JEL: H10 H11
    Date: 2019
  6. By: Antoine Bozio (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Thomas Breda (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Julien Grenet (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the earnings responses to three large increases in employer Social Security contributions (SSCs) in France. We find evidence of full pass-through to workers in the case of a strong and salient relationship between contributions and expected benefits. By contrast, we find limited pass-through of employer SSCs to wages for reforms that increased SSCs with no tax-benefit linkage. Together with a meta-analysis of the literature, we interpret these results as evidence that tax-benefit linkage and its salience matter for incidence, a claim long made by the literature but not backed by direct empirical evidence to date.
    Keywords: Tax- Benefit Linkage,Social Security Contributions,Tax Incidence,Payroll Tax
    Date: 2019–07
  7. By: Congressional Budget Office
    Abstract: Federal receipts and expenditures in the national income and product accounts (NIPAs) differ in certain ways from revenues and outlays as shown in the federal budget. This report presents CBO’s May 2019 baseline projections using the NIPA framework.
    JEL: H50
    Date: 2019–07–24
  8. By: Colagrossi, Marco (European Commission); Karagiannis, Stelios (European Commission); Raab, Roman (European Commission)
    Abstract: The relation between income inequality and support for redistributive policies has long being debated by social scientists, albeit with mostly contrasting findings. We shed light on this puzzle by exploiting a novel EU-28 wide survey (Eurobarometer 471) and matching it with an array of regional and national inequality measures. Using binary choice models, we show that support for redistribution is positively linked with the level of income inequality. The same association is found for perceptions of inequality being too high. In addition, we exploit alternative proxies of socio-economic status as well as subjective beliefs about fairness in the society. We document that individuals believing to be at the top of the social ladder, as well as people considering equal opportunities to be in place, are less supportive of gov- ernment intervention to reduce inequalities. Our results are robust to different measures of inequalities, additional controls as well as a cross-validation with a widely recognized survey (ESS). We conclude that for the planning of policies based on social preferences, inequality matters.
    Keywords: Income inequality; preferences for redistribution; perceptions of inequality
    JEL: D31 D63 H53
    Date: 2019–07
  9. By: Keser, Claudia; Masclet, David; Montmarquette, Claude
    Abstract: Is the labor supply of individuals influenced by their perception of how their income taxes will reflow to them or be wasted in administrative expenditures? We examine this issue experimentally by comparing three different treatments of a real-effort game that vary in the degree of redistribution. At one extreme, the Leviathan scenario, where no tax revenue is redistributed to the taxpayers, is compared to the situation where public expenditures are direct transfer payments. In-between, we investigate a situation where tax revenue is used to finance a public good that provides neither direct nor immediate monetary benefits to the taxpayers. We ran this experiment in three different countries, Canada, France, and Germany, to test whether there may exist any country differences in attitude toward taxation and redistribution. We find that effort is significantly higher in the redistribution treatment than the Leviathan treatment. Tax revenue is the highest in the redistribution treatment, followed by the global public good and the Leviathan treatment. On average, the effort is higher in France than in Canada and Germany.
    Keywords: Real-effort experiment,Taxation,Redistribution,Labor supply,Laffer curve
    JEL: D31 H23 H53
    Date: 2019
  10. By: Akanonu, Precious C.; Ishaku, Joseph; Onyekwena, Chukwuka
    Abstract: This paper examines the potential for changes in the tobacco tax to contribute to raising government revenues, reducing tobacco use, and improving public health in Nigeria. Specifically, it estimates the impact of a change in the excise tax structure and level on cigarette consumption, government revenue, smoking prevalence, net-of-tax (NOT) revenue, and the excise tax burden. To this end, we ran the Tobacco Excise Tax Simulation Model (TETSiM), adapted by the researchers to calibrate for the Nigerian context. We modelled four different policy interventions or changes to the tobacco tax structure and level, under 12 scenarios of economic/income growth (slow, medium, and high growth) and industry price response to an increase in excise taxes (either a full pass-through, or an under-shift or over-shift of the tax onto the retail price). We find that (1) cigarette consumption and smoking prevalence decrease in all 12 scenarios of possible economic/income growth and industry price changes under the policy interventions that impose higher tax levels and specific tax systems; (2) under all policy interventions and in all scenarios considered, government excise tax revenues from cigarette sales increase significantly but are most significant under the specific tax system, relative to the ad valorem tax system; (3) under all policy interventions, the best response to maximise NOT revenue for the tobacco industry is to increase the industry price; (4) under all policy interventions and in all scenarios considered, the excise tax burden to the consumer will at least double; however, since current excise tax burden is very low (at 4 per cent), the policy impact witnessed in the model remains minimal; and (5) we performed a three-year projection of the proposed policy change, which shows a consistent trend of increasing government revenues, decreasing consumption, and decreasing smoking prevalence rates if policy interventions are sustained each year over the three-year period. Based on the findings, we recommend that changes in tax policy need to be significant to have the desired effect on smoking prevalence. In particular, an effective tobacco control tax policy will require that: the tax system is changed from ad valorem to specific tax system; and the excise tax burden on tobacco products is continuously increased at least until it reaches 75 per cent.
    Keywords: Development Policy, Economic Development, Finance, Governance, Health,
    Date: 2019

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