nep-pub New Economics Papers
on Public Finance
Issue of 2020‒02‒24
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Dynamic Taxation By Stefanie Stantcheva
  2. Universal Basic Income and Progressive Consumption Taxes By Juan Carlos Conesa; Bo Li; Qian Li
  3. A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach By Nirmala Devi Mohanadas
  4. Trust in Government Institutions and Tax Morale By Antonios M. Koumpias; Gabriel Leonardo; Jorge Martinez-Vazquez
  5. Should the Government be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets? By Mattia Landoni; Stephen P. Zeldes
  6. Cigarette Taxes and Smoking among Sexual Minority Adults By Carpenter, Christopher S.; Sansone, Dario

  1. By: Stefanie Stantcheva
    Abstract: This paper reviews recent advances in the study of dynamic taxation, considering three main approaches: the dynamic Mirrlees, the parametric Ramsey, and the sufficient statistics approaches. In the first approach, agents' heterogeneous abilities to earn income are private information and evolve stochastically over time. Dynamic taxes are not ex ante restricted and are set for redistribution and insurance considerations. Capital is taxed only in order to improve incentives to work. Human capital is optimally subsidized if it reduces post-tax inequality and risk on balance. The Ramsey approach specifies ex ante restricted tax instruments and adopts quantitative methods, which allows it to consider more complex and realistic economies. Capital taxes are optimal when age-dependent labor income taxes are not possible. The newer and tractable sufficient statistics approach derives robust tax formulas that depend on estimable elasticities and features of the income distributions. It simplifies the transitional dynamics thanks to a newly defined criterion, the “utility-based steady state approach” that prevents the government from exploiting sluggish responses in the short-run. Capital taxes are here based on the standard equity-efficiency trade-off.
    JEL: H2 H21 H23 H24 H25
    Date: 2020–01
  2. By: Juan Carlos Conesa; Bo Li; Qian Li
    Abstract: We provide a comprehensive quantitative evaluation of Universal Basic Income (UBI), evaluating different degrees of generosity and the fiscal alternatives to finance it. Replacing existing targeted transfers with a UBI of equal fiscal cost results in widespred welfare losses. In contrast, a combination of generous UBI (at least $15,000 per household) with a switch to progressive consumption taxation could be beneficial from the perspective of ex-ante expected welfare in the long run. However, the quantitative analysis of the transitional dynamics reveals non-trivial transitional costs for most current households.
    Date: 2020
  3. By: Nirmala Devi Mohanadas (Faculty of Business, Multimedia University, Malaysia. Author-2-Name: Abdullah Sallehhuddin Abdullah Salim Author-2-Workplace-Name: Student Affairs Division, Multimedia University, 63100 Cyberjaya, Selangor, Malaysia Author-3-Name: Suganthi Ramasamy Author-3-Workplace-Name: Student Affairs Division, Multimedia University, 63100 Cyberjaya, Selangor, Malaysia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective – Although corporate tax avoidance is a widely discussed topic in the literature, conflicts do emerge when it is analyzed through the context of primary corporate duty. Should companies, in managing their taxes, solely honor their obligation to increase shareholders' wealth or should they cater to the interests of all their stakeholders? Such conflicts are especially evident in the inconsistent empirical observations on how corporate tax avoidance relate to corporate social responsibility (CSR), which makes the dearth of theoretical analysis on this issue even more conspicuous. Taking into account the socio-political nature and human elements in corporate tax avoidance, theoretical analyses from social sciences' perspectives are becoming markedly crucial. Methodology/Technique – This paper critically reviews the extant literature for discussions on how corporate tax avoidance is influenced by the dissenting approaches towards primary corporate duty.Findings – By allowing an insight into how people act and the world they live in, these analyses form a constructive tool to rationalize and foretell managerial actions towards shareholders and stakeholders alike.Novelty – It focuses particularly on the theories that are widely used to lend supports for such approaches. These theories are the agency theory, stakeholder theory, and legitimacy theory. Type of Paper: Review
    Keywords: Corporate Tax Avoidance; Corporate Social Responsibility (CSR); Theoretical Analysis; Shareholder Approach; Stakeholder Approach; Agency Theory; Stakeholder Theory; Legitimacy Theory.
    JEL: G30 G32 G39
    Date: 2019–12–11
  4. By: Antonios M. Koumpias (Department of Social Sciences, University of Michigan-Dearborn, USA); Gabriel Leonardo (International Center for Public Policy, Georgia State University, USA); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, USA)
    Abstract: What actions do governments around the world take that may affect individuals’ trust in the government that positively influence tax morale (or a positive attitude toward tax compliance)? This paper researches which are the most salient government institutions that breed individual trust and the extent to which this trust ends up increasing citizens’ tax morale. We use cross-country survey information from the World Values Survey and the Freedom House spanning 92 countries and six survey waves during the period 1981-2014. Conditional on the level of political rights and civil liberties, we confirm prior evidence that trust in government organizations positively influences tax morale. More importantly, our findings show that it is trust in output government organizations that implement and deliver public goods and services to the citizenry that has a significantly larger impact on tax morale as compared to citizens’ trust in input-side organizations, such as the legislative and the executive branches of the government that design policy. We also exploit periods of democratic transitions, when large variations in trust may be present, to assess the role of trust in government organizations for tax morale using a treatment effects model. Our results reveal a robust, positive impact of negative democratic transitions on tax morale.
    Date: 2020–02
  5. By: Mattia Landoni; Stephen P. Zeldes
    Abstract: Under standard assumptions, both individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. When we add investment fees to this benchmark, individuals are still indifferent but the government is not. We estimate that tax deferral increases demand for asset management services by $3 trillion, causing the government to pay $20.7 billion in corresponding annual fees. In a general equilibrium model with asset management services as differentiated products, we examine the incidence and welfare implications of the added demand. Tax deferral in our model produces a larger asset management industry, higher taxes, and lower social welfare.
    JEL: D14 G11 G23 G28 H21 J26 J32
    Date: 2020–01
  6. By: Carpenter, Christopher S. (Vanderbilt University); Sansone, Dario (Georgetown University)
    Abstract: We provide the first quasi-experimental evidence on the relationship between cigarette taxes and sexual minority adult smoking by studying individuals in same-sex households (a large share of whom are in same-sex romantic relationships) from the 1996-2018 Behavioral Risk Factor Surveillance System. We find that cigarette taxes significantly reduced smoking among men and women in same-sex households, and the effects we find for men in same-sex households are significantly larger than the associated effects for men in different-sex households (the vast majority of whom are heterosexual married/partnered men). This result suggests that the sizable disparities in adult smoking rates between heterosexual and sexual minority men would have been even larger in the absence of stricter tobacco control policy. In line with previous research indicating that cigarette taxes have 'lost their bite', we find no significant relationship between cigarette taxes and sexual minority smoking in more recent years.
    Keywords: LGBT, cigarette tax, health disparities
    JEL: H20 H71 I12 I18
    Date: 2020–01

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