nep-pub New Economics Papers
on Public Finance
Issue of 2020‒02‒10
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Fiscal Policies under Market Failures By YiLi Chien; Yi Wen
  2. A Unified Perspective on Efficiency, Redistribution, and Public Policy By Louis Kaplow
  3. The Budget and Economic Outlook: 2020 to 2030 By Congressional Budget Office
  4. Tax complexity in Australia: A survey-based comparison to the OECD average By Hoppe, Thomas
  5. Mining taxation in Africa: What recent evolution in 2018? By Yannick Bouterige; Céline de Quatrebarbes; Bertrand Laporte

  1. By: YiLi Chien; Yi Wen
    Abstract: The aggregate capital stock in a nation can be overaccumulated for many different reasons. This paper studies which policy or policy mix is more effective in achieving the socially optimal (golden rule) level of aggregate capital stock in an infinite-horizon heterogeneous-agents incomplete-markets economy where capital is over-accumulated for two distinct reasons: (i) precautionary savings and (ii) production externalities. By solving the Ramsey problem analytically along the entire transitional path, we show that public debt and capital taxation play very distinct roles in dealing with the overaccumulation problem. The Ramsey planner opts neither to use a capital tax to correct the overaccumulation problem if it is caused solely by precautionary saving---regardless of the feasibility of public debt---nor use debt (financed by consumption tax) to correct the overaccumulation problem if it is caused solely by pollution---regardless of the feasibility of a capital tax. The key is that the modified golden rule has two margins: an intratemporal margin pertaining to the marginal product of capital (MPK) and an intertemporal margin pertaining to the time discount rate. To achieve the MGR, the Ramsey planner needs to equate not only the private MPK with the social MPK but also the interest rate with the time discount rate---neither of which is equalized in a competitive equilibrium. Yet public debt and a capital tax are each effective only in calibrating one of the two margins, respectively, but not both.
    Keywords: Optimal Quantity of Debt; Capital Taxation; Ramsey Problem; Heterogeneous Agents; Incomplete Markets; Pollution; Production Externalities
    JEL: E13 E62 H21 H30 H27
    Date: 2020–01–21
  2. By: Louis Kaplow
    Abstract: Specialized theoretical and empirical research should in principle be embedded in a unified framework that identifies the relevant interactions among different phenomena, enables an appropriate matching of policy instruments to objectives, and grounds normative analysis in individuals’ utilities and a social welfare function. This article advances an approach that both provides integration across many dimensions and contexts and also identifies which tasks may be undertaken separately and how such analysis should be conducted so as to be consistent with the underlying framework. It employs the distribution-neutral methodology and welfare analysis developed in Kaplow (2008a) and related work, offering applications to income taxation, commodity taxation, tax expenditures, externalities, public goods, capital income and wealth taxation, social security and retirement savings, estate and gift taxation, and transfer programs. It also explores welfare criteria and examines how their consideration enables the normative analysis of the taxation of families, heterogeneous preferences, and tax administration and enforcement.
    JEL: D61 D62 D63 H20 H21 H23 H24 H26 H41 H43 H53 H55
    Date: 2020–01
  3. By: Congressional Budget Office
    Abstract: In CBO’s projections, the federal budget deficit equals $1.0 trillion in 2020 and averages $1.3 trillion per year over the 2021–2030 period, under the assumption that existing laws governing taxes and spending generally remained unchanged. Because of those large deficits, federal debt held by the public is projected to grow from 79 percent of GDP in 2019 to 98 percent of GDP in 2030. By 2050, debt would be 180 percent of GDP—far higher than it has ever been.
    JEL: H20 H60 H61 H62 H63 H68
    Date: 2020–01–28
  4. By: Hoppe, Thomas
    Abstract: This article comprehensively reviews Australia's corporate income tax complexity as faced by multinational corporations (MNCs) and compares it to the average of the remaining OECD countries. Building on unique survey data, I find that the Australian tax code is considerably more complex than the OECD average, which is mainly due to overly complex anti-avoidance legislation, such as regulations on transfer pricing, general anti-avoidance or controlled foreign corporations (CFC). In contrast, Australia's tax framework, which covers processes and fea-tures such as tax law enactment or tax audits, is close to the OECD average. A more granular analysis yields further interesting insights. For example, excessive details in the tax code and the time between the announcement of a tax law change and its enactment turn out to be serious issues in Australia relative to the remaining OECD countries.
    Keywords: Tax Complexity,Corporate Income Tax System,Survey,Australia,OECD Countries
    JEL: H20 H25 C83 O57
    Date: 2020
  5. By: Yannick Bouterige (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Céline de Quatrebarbes (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Bertrand Laporte (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The mining sector accounts for a significant share of tax revenues in many sub-Saharan African countries. Mining tax systems must then both attract investors and ensure sufficient revenues for governments. Following the increase in commodity prices in the second half of the 2000s, most African countries reformed their Mining Acts to increase the tax burden on mining companies. This study shows that this trend is still continuing in 2018. Mining royalty rates are rising, mineral resource rent taxes are reappearing and free equity for the States is increasing.
    Keywords: Mining code,tax
    Date: 2019–12–22

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