nep-pub New Economics Papers
on Public Finance
Issue of 2020‒03‒16
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Effects of Corporate Taxes on Small Firms By Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
  2. Long-run inheritance tax and capital income tax with rational altruism By Pascal Belan; Erwan Moussault
  3. Double Tax Avoidance and Tax Competition for Mobile Capital By Leibrecht, Markus; Rixen, Thomas
  4. Tax Competition and Inequality: The Case for Global Tax Governance By Rixen, Thomas
  5. Taxation with Representation: The Political Economy of Foreigners’ Voting Rights By Gonnot, Jérôme

  1. By: Harju, Jarkko; Koivisto, Aliisa; Matikka, Tuomas
    Abstract: We study the impact of corporate taxes on firm-level investments, total output and input usage by exploiting a 4.5 percentage-point corporate tax rate cut in Finland in 2014. We use detailed administrative data and a differences-in-differences method comparing small corporations (tax rate cut) to similar partnerships (no change in tax incentives). We find no significant investment responses. However, we observe an increase in annual sales and variable costs, suggesting that corporate tax rates have an effect on business activity. The effects are driven by entrepreneurs who actively work in their firm, suggesting that the tax cut increased entrepreneurial effort.
    Keywords: corporate taxation, investments, business activity, small firms, Social security, taxation and inequality, Business regulation and international economics, G31, G38, H21, H25,
    Date: 2020
  2. By: Pascal Belan; Erwan Moussault (Université de Cergy-Pontoise, THEMA)
    Abstract: We consider a two-period overlapping generation model with rational altruism à la Barro. The government finances public spending with taxes on labor income, capital income and inheritance. We show that, in the long-run, inheritance tax and capital income tax are generally different from zero, even if the optimal tax policy leads to the modified Golden-rule.
    Keywords: inheritance tax, capital income tax, altruism.
    JEL: D64 H21 D91
    Date: 2020
  3. By: Leibrecht, Markus; Rixen, Thomas (Freie Universität Berlin)
    Abstract: Postprint. Please cite as: Leibrecht, Markus and Thomas Rixen (2010) Double Tax Avoidance and Tax Competition for Mobile Capital, in: Martin Zagler (Ed.): International Tax Coordination. An Interdisciplinary Perspective on Virtues and Pitfalls, Routledge, 61-97.
    Date: 2020–02–28
  4. By: Rixen, Thomas (Freie Universität Berlin)
    Abstract: Postprint. Please cite as: Rixen, Thomas (2011) Tax Competition and Inequality: The Case for Global Tax Governance. Global Governance 17 (4), 447-467.
    Date: 2020–02–28
  5. By: Gonnot, Jérôme
    Abstract: This paper examines natives’ decision to grant political rights to foreign residents based on their contribution to a redistribution mechanism that finances a private and a public good. We propose a model where agents’ redistributive preferences are determined by their skill level and their cultural beliefs about public spending, which vary by skill and nationality. Contrary to a commonly held view in the political economy literature, we show that low-skill natives are willing to enfranchise relatively skilled foreigners as long as these foreigners have sufficiently liberal beliefs towards public spending. Moreover, we establish that the political rights that low-skill natives are prepared to grant to foreign residents is a nonmonotonic function of immigration’s skill level and cultural support for public expenditure. In particular, low-skill natives favor greater political integration for less-skilled or more liberal foreigners if and only if these foreigners’ average relative preferences for the private and the public good are sufficiently close to their own. We provide empirical support for some of the theoretical predictions of the model using an original municipality-level dataset of Swiss referenda about non-citizen voting rights. Our results indicate that municipalities where a higher share of natives received social transfers were more likely to support immigrant voting and that this effect was greater where foreigners were poorer and emigrated from less economically conservative countries.
    JEL: H41 H53 J68 D72
    Date: 2020–02

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