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on Public Finance |
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Issue of 2010‒11‒13
four papers chosen by |
| By: | Piergallini, Alessandro; Rodano, Giorgio |
| Abstract: | Since Leeper's (1991, Journal of Monetary Economics 27, 129-147) seminal paper, an extensive literature has argued that if fiscal policy is passive, i.e., guarantees public debt stabilization irrespectively of the inflation path, monetary policy can independently be committed to inflation targeting. This can be pursued by following the Taylor principle, i.e., responding to upward perturbations in inflation with a more than one-for-one increase in the nominal interest rate. This paper analyzes an optimizing framework in which the government can only finance public expenditures by levying distortionary taxes. It is demonstrated that households' market participation constraints and Laffer-type effects can render passive fiscal policies unfeasible. For any given target inflation rate, there exists a threshold level of public debt beyond which monetary policy independence is no longer possible. In such circumstances, the dynamics of public debt can be controlled only by means of higher inflation tax revenues: inflation dynamics in line with the fiscal theory of the price level must take place in order for macroeconomic stability to be guaranteed. Otherwise, to preserve inflation control around the steady state by following the Taylor principle, monetary policy must target a higher inflation rate. |
| Keywords: | Public Debt; Distortionary Taxation; Monetary and Fiscal Policy Rules |
| JEL: | H31 E63 H63 |
| Date: | 2010–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:26318&r=pub |
| By: | Carl Gaigné; Ian Wooton |
| Abstract: | The EU policy against harmful tax competition aims at eliminating tax policies targeted at attracting the internationally mobile tax base. We construct an imperfectly competitive model of costly trade between two countries. In setting their corporate taxes, governments non-cooperatively decide whether to discriminate between internationally mobile and immobile firms. We find the Nash equilibrium tax regimes. When trade costs are high countries impose a uniform tax on all firms while nations will discriminate between mobile and immobile firms when costs are low. At some trade costs, fiscal competition results in tax discrimination despite uniform taxation being socially preferable. |
| Keywords: | preferential tax regimes; tax competition; imperfect competition; trade costs |
| JEL: | H87 F12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rae:wpaper:rae:wpaper:201006&r=pub |
| By: | Heinemann, Friedrich |
| Abstract: | This study analyzes the sensitivity of US giving to both business cycle fluctuations and trend growth. With tax revenues as a point of reference, US giving constitutes a relatively stable source of revenue. Total giving is characterized by a business cycle volatility which is comparable to the moderate one of indirect taxes. However, this overall finding is composed of the respective sub-components' very different short-run GDP-elasticities. Individual and, to an even larger extent, corporate giving is quite sensitive to cyclical fluctuations. By contrast, foundation giving and charitable bequests tend to stabilize total giving over the business cycle. The macro estimates for the income elasticities lie in the upper band of the well researched micro-estimates. This is consistent with a social multiplier view according to which individual giving is mutually reinforcing. -- |
| Keywords: | charitable giving,social multiplier,error-correction-model |
| JEL: | H27 H41 C22 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10075&r=pub |
| By: | Niu, Yongzhi; Cohen, Roger |
| Abstract: | Based on the recognition that the evasion of real estate tax is much more difficult than the evasion of personal income tax and the assumption that, in general, taxpayers with similar income would consume a similar amount of housing and pay a similar amount of real estate tax, we build a model to estimate the personal income tax gap for business income earners in New York State. More specifically, we compare reported Federal adjusted gross income (AGI) between two groups of taxpayers: wage earners and business income earners. With the assumption that the wage income earners fully report their income, we find that there is a huge reporting gap of AGI for the business income earners in New York State as a whole. The income gap is $67.8 billion in 2007, which accounts for 26.2 percent of the total AGI the business income earners would have reported if they had been totally compliant with tax laws. If we apply the median of the New York State personal income tax rate, 5.25 percent, to the income gap, the personal income tax gap for the business income earners in the State in 2007 reaches $3.6 billion. |
| Keywords: | tax gap; PIT; personal Income Tax; business income; wage income; real estate tax; underreporting; |
| JEL: | H20 H24 H26 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:26437&r=pub |