TAXATION OF ECONOMIC RENTS

Economic rents have long been identified as an efficient tax base. In addition, the recent literature documents that rent income is highly concentrated and that rents are quickly increasing. Rent taxation thus seems attractive for reasons of both efficiency and equity. Nevertheless, rent taxation remains a marginal topic in research and policy making. In a systematic review of the neoclassical literature on different rent types, we find that some types of rents reflect inefficiencies and should thus be minimized, while others reward investments and should be supported in line with social welfare. What remains for taxation are land rents, one of the few true scarcity rents. Land rents have significant potential to improve the efficiency of the tax system. We then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects. The interaction of many of these effects remains unexplored, which might explain policymakers' hesitation in using land taxes to date.     

Income taxation when markets are incomplete

We investigate the welfare effects of proportional income taxation in a standard general equilibrium model with incomplete markets (GEI). Formally, our analysis is on the allocative effects of state-contingent income tax reforms. Tax reforms are restricted to be anonymous, publicly and truthfully announced before markets open, and they are required to result in an ex-post constrained efficient allocation. Our main result is to show that there do typically exist contingent tax reforms that are Pareto improving. These reforms, acting directly on the asset span, modify private risk-sharing opportunities. Thus, unlike most of the GEI literature, the type of policy transmission mechanism considered does not rely on second-order, relative spot price effects. Yet, the key welfare effects of our tax reforms are substantially equivalent to those induced through changes in relative spot prices, as, for example, in Geanakoplos and Polemarchakis (1986), Geanakoplos et al. (1990), or in Citanna et al. (2001). Mathematics Subject Classification (2000): 58E17, 46N10, 93B29 Journal of Economic Literature Classification: D52, H21, H24, H25     

Commodity market reform in Africa: some recent experience

Since the early 1980s, dramatic changes in export commodity markets, shocks associated with resulting price declines and changing views on the role of the state have ushered in widespread reforms to agricultural commodity markets in Africa. The reforms significantly reduced government participation in the marketing and pricing of commodities. This paper examines the background, causes, process and consequences of these reforms and derives lessons for successful reforms from experiences in markets for four commodities important to Africa—cocoa, coffee, cotton, and sugar. The commodity focus of the paper highlights the special features associated with these markets that affect the reform process. The paper complements the current literature on market reforms in Africa, where grain market studies are more common. We suggest that the types of market interventions prior to reform are more easily classified by crop than by country. Consequently, there are significant commodity-specific differences in the initial conditions and in the outcomes of reforms related to these markets. However, there are general lessons as well. We find that the key consequences of reform have been significant changes in or emergence of marketing institutions, and a significant shift of political and economic power from public to private sector. In cases where interventions were greatest and reforms most complete, producers have benefited from receiving a larger share of export prices. Additionally, we conclude that the adjustment costs of reform can be reduced in most cases by better understanding the detailed and idiosyncratic relationships between the commodity subsector, private markets, and public services. Finally, while there are significant costs to market-dependent reforms, experiences suggest that they are a necessary step toward a dynamic commodity sector based on private initiative. Indeed, this is particularly true in countries and sectors where interventions were greatest and market-supporting institutions the weakest.     

On the cost-benefit of the regionalisation of the National Health Service

In this paper we analyse in formal terms the desirability of the regionalisation of a National Health Service. The policy consists of a devolution process, i.e. the increase in the health services provision to be decided by a region and financed by an increase in its revenues. The change is a marginal one, as it regards the part of supply of the health services exceeding a minimum standard, which for purposes of equity is maintained uniform in the national territory. As the central government is responsible for this component of the provision of health care (a federal “mandate”), the level of the said component is chosen by this authority and financed by federal taxation. Moreover, the government also applies an equalisation scheme based on the difference between a standard level of tax revenues and the revenues which the region is deemed able to raise for this purpose. Within the theoretical context of welfare improving reforms with distortionary taxation, we derive two conditions which focus on the regional, as well as the social, convenience of regionalisation. Received: May 5, 1999 / Accepted: January 21, 2000     

Transport tax reform, commuting, and endogenous values of time

We consider a model of urban transport with two trip purposes, commuting (assumed perfectly complementary to labour supply) and noncommuting, to analyse the effects of transport tax reform on the value of time and marginal external congestion costs. Higher commuting taxes plausibly reduce time values, but higher noncommuting transport prices will typically raise the value of time. The intuition for this latter finding is that the reduction in congestion that follows from the tax increase itself raises net wages per hour of work (inclusive of commuting time). Empirical illustrations with Belgian data show a potentially large effect of transport tax reform on time values. In quite a few of the tax reforms studied traffic levels are reduced, but the increase in time values implies that marginal external congestion costs actually increase.     

Corporate income tax and futures hedging

Our research is motivated by the Corn Products vs. Arkansas Best Supreme Court decisions that pitched the controversy of the tax treatment of gains and losses from futures hedging. The use of futures contracts as risk management tools depends on the tax code. In this paper we address complications in the current tax code that allow for asymmetric offset: Ordinary losses can be applied against capital gains; however, capital losses cannot by applied against ordinary gains. Also we consider the issue of tax loss carryover. We investigate the optimal hedge ratios under these scenarios analytically where possible, and numerically where necessary. Michael Metz is an independent commodity market consultant.     

个人所得税对居民消费影响研究的文献综述

1994年至今,个人所得税已经历四次重大改革,个税改革是税制改革的重点内容。本文将从个人所得税对居民消费影响的理论研究和实证研究方面,对现有个人所得税的研究文献进行梳理总结,并进行述评,总结现有文献研究存在的不足之处,以期为进一步研究个人所得税对居民消费影响研究提供依据和方向。     

Partial Horizontal Inequity Orderings: A Non‐parametric Approach*

We provide a partial ordering view of horizontal inequity (HI), based on the Lorenz criterion, associated with different post‐tax income distributions and a (bistochastic) non‐parametric estimated benchmark distribution. As a consequence, several measures consistent with the Lorenz criterion can be rationalized. In addition, we establish the so‐called HI transfer principle, which imposes a normative minimum requirement that any HI measure must satisfy. Our proposed HI ordering is consistent with this principle. Moreover, we adopt a cardinal view to decompose the total effect of a tax system into a welfare gain caused by HI‐free income redistribution and a welfare loss caused by HI, without any additive decomposable restriction on the indices. Hence, more robust tests can be applied. Other decompositions in the literature are seen as particular cases.     

Optimal tax progressivity in imperfect labour markets

All modern labour market theories capable of explaining involuntary unemployment as an equilibrium phenomenon imply that increased income tax progressivity reduces unemployment, but they also imply that higher progressivity tends to reduce work effort and labour productivity. This suggests that there may be an optimal degree of tax progressivity where the marginal welfare gain from reduced involuntary unemployment is just offset by the marginal welfare loss from lower productivity. This paper sets up four different models of an imperfect labour market in order to identify the degree of tax progressivity which would maximise the welfare of the representative wage earner. Simulations with these models suggest that the optimal degree of tax progressivity could be quite large, although the results are sensitive to the generosity of unemployment benefits and to the after-tax wage elasticity of work effort.     

Anticipation,learning and welfare: the case of distortionary taxation

We study the impact of anticipated fiscal policy changes in a Ramsey economy where agents form long-horizon expectations using adaptive learning. We extend the existing framework by introducing distortionary taxes as well as elastic labor supply, which makes agents’ decisions non-predetermined but more realistic. We detect that the dynamic responses to anticipated tax changes under learning have oscillatory behavior that can be interpreted as self-fulfilling waves of optimism and pessimism emerging from systematic forecast errors. Moreover, we demonstrate that these waves can have important implications for the welfare consequences of fiscal reforms.     

Future changes in age and household patterns: Some implications for public finances

Using stochastic forecasting techniques, this paper assesses the consequences for public finances of changes in age and household structures in Denmark over the period 2008–2037. Focusing on components of welfare provisions and tax payments with noticeable differences across age and household status, we show that, based on a point forecast, the fiscal impact of changes in household structures amounts to an annual negative effect of 0.5% of GDP, and the effect of changes in age structures is forecast to worsen the public budget by 3.7% of GDP per year. While being subject to a considerable amount of uncertainty, the prospect of such a dramatic weakening of public finances is likely to trigger demands for welfare reforms characterized by a more individualized system of public transfer and tax payments, in addition to the measures that have already been taken to address the fiscal effects of population ageing.     

NONLINEAR GROWTH EFFECTS OF TAXATION: A SEMI‐PARAMETRIC APPROACH USING AVERAGE MARGINAL TAX RATES

One of the major challenges of empirical tax research is the identification and calculation of appropriate tax data. While there is consensus that average marginal tax rates are most suitable for studying the effects of tax policy on economic growth, because of data limitations the calculation of marginal tax rates has been limited to the USA and the UK. This paper provides calculations of average marginal tax rates for the four Scandinavian countries using the methodologies of Seater (1982, 1985) and Barro and Sahasakul (1983, 1986). Then, by pooling the newly calculated tax rates for the Scandinavian countries with the data for the USA and the UK, we investigate the effects of tax policy shocks on the per capita GDP growth rate. Our results suggest that an increase in average marginal tax rates has a negative impact on economic growth. Employing additive mixed panel models with penalized splines as estimation approach, we show that changes in tax rates have nonlinear effects. Increasing average marginal tax rates turn out to be the most distorting at relatively moderate tax rates. Copyright © 2013 John Wiley & Sons, Ltd.     

Labor supply responses to the 1990s Japanese tax reforms

The consumption-leisure choice model implies that an exogenous change in tax rates will induce a change in labor supply. This implication is expected to be important to labor supplied by secondary earners under a progressive tax system when spousal income alters effective marginal tax rates. This paper examines labor supply responses to the income tax changes associated with Japanese tax reforms during the 1990s. The results indicate that the hours-of-work elasticity with respect to the net-of-tax rate is 0.8 for married women.     

Income taxes and urban spatial structure

This paper examines the impact of an income tax in a monocentric city where households equilibriate their allocation of time between work, commuting, and leisure. An increase in the income tax rate lowers the implicit value of time, and hence transportation costs. “Compensated equilibrium” comparative statics analysis shows that under certain conditions, this results in a larger, more dispersed urban area, with lower land rents at the city center and less population within any given distance from the center. The welfare effect of an income tax rate change is also studied, and an expression for the marginal excess burden is derived. The income tax produces welfare losses both because it induces substitution in favor of leisure and in favor of travel—the latter accompanied by excessive spatial dispersion and consumption of space. The marginal excess burden depends not only on the compensated demand elasticity for leisure, but also on that for space. Finally, the problem of benefit measurement for transportation projects in this tax-distorted spatial economy is examined. Benefit measures should be deflated to adjust for the fact that further transportation improvements lead to reduction of land use intensity, exacerbating the problem of spatial resource misallocation in an already excessively dispersed urban area.     

Inflation tax in the lab: a theoretical and experimental study of competitive search equilibrium with inflation

In this paper we measure the effect of the inflation tax on economic activity and welfare within a controlled setting. To do so, we develop a model of price posting and monetary exchange with inflation and finite populations. The model, which provides a game–theoretic foundation to Rocheteau and Wright (2005)׳s competitive search monetary equilibrium, is used to derive theoretical propositions regarding the effects of inflation in this environment, which we test with a laboratory experiment that closely implements the theoretical framework. We find that the inflation tax is harmful – with cash holdings, production and welfare all falling as inflation rises – and that its effect is relatively larger at low inflation rates than at higher rates. For instance, for inflation rates between 0% and 5%, welfare in the two markets we consider (2[seller]×2[buyer] and 3×2) falls by roughly 1 percent for each percentage–point rise in inflation, compared with 0.4 percent over the range from 5% to 30%. Our findings lead us to conclude that the impact of the inflation tax should not be underestimated, even under low inflation.     

最优税收理论及对我国税制改革的政策启示

最优税收理论是近年来经济学家们比较感兴趣的研究领域之一。最优税收理论主要包括商品税与所得税的组合理论、最优商品税、最优所得税三个方面。本文旨在阐述、评价最优税收理论的主要内容,并在此基础上,得出对我国的税制改革的政策启示     

On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city

This paper examines congestion taxes in a monocentric city with pre-existing labor taxation. When road toll revenue is used to finance labor tax cuts, 35% of the optimal road tax in our numerical model does not reflect marginal external congestion costs, but rather functions as a Ramsey–Mirrlees tax, i.e. an efficiency enhancing mechanism allowing for an indirect spatial differentiation of the labor tax. This adds a quite different motivation to road pricing, since welfare gains can be produced even in absence of congestion. We find that the optimal road tax is non-monotonic across space, reflecting the different impacts of labor supply elasticity and marginal utility of income, which both vary over space. The relative efficiencies of some archetype second-best pricing schemes (cordon toll, flat kilometer tax) are high (84% and 70% respectively). When road toll revenue is recycled lump-sum, the optimal toll lies below its Pigouvian level. Extensions in a bimodal framework show that the optimality of using road toll revenue to subsidize public transport depends on the initial inefficiency in public transport pricing.     

ENTREPRENEURS' LOCATION CHOICE AND PUBLIC POLICIES: A SURVEY OF THE NEW ECONOMIC GEOGRAPHY

Abstract The aim of this paper is to survey what has been done by the New Economic Geography (NEG) on a regional scale in order to answer the three following questions: What are the predictions of the NEG concerning the future of regions in the triad? Are these predictions robust? What can be the optimal public policy on a regional and national scale in a world characterized by agglomeration, trade liberalization and mobility of entrepreneurs? In surveying the most recent contributions in this area, the paper sheds light on several shortcomings of the NEG literature in order to point out new directions for further research, with particular reference to studies concerning welfare and tax competition.     

DEVELOPMENT OF REGIONAL SOCIAL ACCOUNTING MATRICES WITH DETAILED AGRICULTURAL LAND RENT DATA AND IMPROVED VALUE-ADDED COMPONENTS FOR THE USA

We describe a method for creating social accounting matrices (SAMs) with detailed agricultural land rent data for any arbitrary subset of the 48 contiguous states in the USA. Data on land use and land rents from various public sources is merged with national accounts data. The method reorganizes the rental income of persons concept present in national accounts to payments to conventional primary factors of production. This method also reallocates portions of the indirect business tax account to the appropriate sales and import tax accounts. SAMs created using this method should be useful inputs into input–output or computable general equilibrium models explicitly representing a heterogeneous land market and analyzing the economic effects of agricultural, bioenergy, water and climate policies on land-use change, land rents, agricultural commodity markets, trade and households’ welfare. The method's implementation is freely available, enabling others to rapidly create SAMs with their own desired region and sector aggregations.     

‘Klin’-ing up: Effects of Polish tax reforms on those in and on those out

In 2007 and 2008 Polish governments introduced a series of reforms which led to a substantial reduction in the tax “wedge” (in Polish: “klin”) on labour. These consisted of reductions in the disability rate of social security contributions (SSCs) and an introduction of an income tax credit for families with children. We show that the SSCs reforms on their own brought much greater reductions in the tax burden compared to a widely discussed 15% “flat tax”, despite a very similar simulated cost. When considered together the package of introduced reforms reduced the mean ATR on total labour cost from 41.6% to 35.7%. This compares to the mean ATR of 39.6% which would result from the introduction of the “flat tax”. In the analysis we present the effects of the reforms both for the employed and for the non-employed populations. The latter analysis is done in such a way as to account for the entire (simulated) distribution of wages of the non-employed and shows interesting differences between the effects of reforms on employed and non-employed individuals. We argue that to fully appreciate the effect of reductions in labour taxation it is important to bear in mind that one of the reasons for introducing them is to make employment more likely for those who currently do not work, and demonstrate that the introduced package has had a particularly important effect on non-employed second earners. Given the extent of the reductions in the “klin” it is somewhat surprising that so far so little attention has been given to the recent Polish reforms.