The Triple Taxation of Corporate EquityProfits

In the absence of liquidations and share repurchases, the value of corporate equity is the net present value of all future dividends. This net present value is subject to three taxes: the corporate income tax, the dividend income tax, and the capital gains tax. Algorithms are developed for calculating the aggregate tax rate on corporate equity net present value. Although the lowest aggregate tax rate occurs when all earnings are paid as dividends, corporations increase shareholder value by reinvesting earnings whenever the after-tax returns of doing so exceed the discount rate. It is these high return investments that are subject to the highest aggregate tax rates, potentially exceeding 90 percent of pre-tax value under current law.The author would like to thank Stephen Shmanske for his insights and support in the preparation of this paper. The author is also grateful to Donald Wort and Gary McBride for their comments. All remaining errors and omissions are the responsibility of the author.     

Timing is Everything: The Impact of School Lunch Length on Children's Body Weight

The large number of overweight children in the United States has prompted school administrators and policy makers to identify practices in schools that contribute to unhealthy weight outcomes for children and develop strategies to prevent further increases. Advocates for school nutrition reform have suggested that it is important for children to have an adequate amount of time to eat meals in school in order to maintain a healthy weight. This article examines whether the length of time children are given to eat lunch in school has an impact on their weight. I find evidence that an increase in lunch length reduces the probability a child is overweight, and this finding is robust across various econometric specifications, including a two‐sample instrumental variable model and difference‐in‐differences model that account for the potential endogeneity of lunch length.     

The Effects of State Merit Aid Programs on Attendance at Elite Colleges

State merit aid programs have been found to reduce the likelihood that students attend college out of state. Using the U.S. News & World Report (USNWR) rankings of colleges and universities to measure college quality and Integrated Postsecondary Education Data System data to measure enrollment, we explore how this reduction in out‐of‐state enrollment differs by the academic quality of the institution. Our difference‐in‐differences results suggest that state merit aid programs do not induce students to forgo attending top 15 ranked schools. However, state merit aid does induce some students to forgo attending out‐of‐state schools ranked below the top 15 and shifts them toward lower quality in‐state schools, so that the net effect is a reduction in academic quality, as measured by USNWR. These effects may have long‐term implications for students' degree completion rates and labor market earnings.     

The Effects of Differential Income Replacement and Mortality on U.S. Social Security Redistribution

We study redistribution via the U.S. Social Security retirement system for cohorts of men born during the second half of the 20th century. Our focus is on redistribution across race and education groups. The cohorts we study are younger than cohorts studied in previous, similar research and thus more exposed to recent increases in earnings inequality. All else equal, this should increase the degree of progressivity of Social Security redistribution due to the structure of the benefit formula. However, we find that redistribution is only modestly progressive for individuals born as late as 1980. Differential mortality rates across race and education groups are the primary explanation. While Black–White mortality gaps have narrowed some in recent years, they remain large and dull progressivity. Mortality gaps by education level are also large and unlike the gaps by race, they are widening, which puts additional regressive pressure on Social Security redistribution.     

Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods

Tax reforms are often motivated by their potential to improve economic performance. However, their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the eight Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post‐reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time‐varying impact of unobservable heterogeneity. We find positive impacts in all eight countries, with seven out of eight cases significant at the conventional level.     

Immigration and the public transfer system: Some empirical evidence for Switzerland

Immigration and the Public Transfer System: Some Empirical Evidence for Switzerland. —The paper deals with the distributional effects of immigration into Switzerland. The cross-section analysis for 1990 shows that the presence of resident foreigners has not put additional strain on the public purse. On the contrary, there was a favourable financial effect for the native population. The analysis reveals how important the age and qualification of the household head and the number of children in the household are. By including both monetary and real public transfer payments a compre-hensive account of the budget effects of immigration is given.     

Are Charters the Best Alternative? A Cost Frontier Analysis of Alternative Education Campuses in Texas

Previous research on the relative efficiency of charter schools focused on schools that serve a general student population. In Texas, as in many other states, some charter schools have been designed specifically to serve students who are at risk of dropping out of school. Such “alternative education campuses” may have very different cost and efficiency profiles than schools designed to serve students in regular education programs. In this article, we estimate a translog stochastic cost frontier model using panel data for alternative public high school campuses in Texas over the five‐year period 2007–2011, and find that alternative education high school campuses operated by charter schools are systematically more efficient than alternative education high school campuses operated by traditional public school districts. Policies that encourage the formation of alternative education charter campuses may thus be a sensible component of strategies to combat the pervasive and pernicious problem of high school dropouts.     

Institutions and the rise of taxes on labour in the OECD

Institutions and the Rise of Taxes on Labour in the OECD. —The aim of this paper is to explain differences among OECD countries in the evolution of taxes on labour during the last two decades. Its main message is that these taxes are to an important extent structurally and institutionally determined. Tax rates on labour are shown to have risen more strongly in countries where: (i) government has been controlled mainly by leftist parties; (ii) taxes (in general) are decided and collected mainly by central government (fiscal centralization); (iii) coalition and minority governments are frequent; (iv) the partisan composition (political colour) of these coalitions is unstable; (v) the labour market is neither centralized nor decentralized.     

Separation of powers and the tax level in the U.S. states

We estimate a nonlinear and discontinuous relationship between the tax level and the degree of alignment between the legislature and the governor, measured as the number of seats in the legislature that belong to the governor's party. In the states with the line‐item veto, the tax level jumps at the point where the government switches from divided to unified. With a regression discontinuity design, we show that this jump can be interpreted as a causal effect. We propose a simple model to account for this nonlinear relationship. The sequential nature of the budget bargaining game, that is, the legislature proposes and the governor cuts with the line‐item veto, implies that the tax level is determined by the overlap between the supporters of the governor and the supporters of the legislative majority. Changes in the size of the overlap determine the tax level.     

Estimates of average marginal tax rates on factor incomes in Japan

In this paper, we estimate average marginal tax rates on factor incomes in Japan from 1963 to 2007. We adapt the method of D.H. Joines [Estimates of effective marginal tax rates on factor incomes. J. Bus. 54 (2), 191-226.] to the Japanese tax and social security system. Average marginal tax rates on labor incomes without social security premiums range from 14% to 21%, whereas the rates on incomes with social security have increased from 21% to 33%. Tax rates on capital incomes have fluctuated between 35% and 58%. We also compare our estimates with average tax rates and the wedges from business cycle accounting.     

Reasonable and Risk‐Based? Replacing NFIP Generally Subsidized Rates with a Means‐Tested Subsidy

The National Flood Insurance Program was created to seek two often conflicting goals: (i) shifting risks from federal taxpayers to those who choose to live in flood plains and (ii) ensuring flood insurance is available to everyone at “reasonable” rates. Efforts to accomplish the second goal currently take the form of subsidies based on location and the date a home was constructed. The resulting revenue from subsidized insurance premiums is not sufficient to cover the true cost of flood insurance, and federal taxpayers have paid the difference: $30 billion to date. Based on a detailed survey of households in the high‐risk flood zones of New York City (NYC), we find that replacing existing premium subsidies with risk‐based prices and a subsidy for low‐income housing‐burdened households could better meet both goals by ensuring low‐income individuals have access to affordable flood insurance while still saving the federal taxpayer up to $183 million per year in NYC alone.     

The effects on insurance costs of restricting undocumented immigrants' access to driver licenses

Proponents of issuing driver licenses to undocumented immigrants argue that the number of uninsured motorists and car accidents would decrease, thus improving public safety and lowering costs associated with car insurance. This study gives an overview of competing cost reduction and public safety arguments and examines the issues surrounding undocumented immigrants and driver licenses. It empirically assesses the effect on the average cost of auto insurance of restricting undocumented access to legal driving documents. We use a fixed effects model for panel data to test the effects on real average insurance expenditures of restricting undocumented immigrants' access to driver licenses, while controlling for other relevant factors suggested in the literature. Our main finding is that on net such restrictions raise the average annual cost of auto insurance by an estimated $17.22 ($2009) across states that have enacted such restrictions.     

THE EFFECT OF THE SOUTH AFRICAN OLD AGE PENSION ON LABOUR SUPPLY OF THE ELDERLY

In this paper, we estimate the effect of the means tested South African Old Age Pension on labour supply amongst the elderly African subpopulation in South Africa. We find significant decreases in employment rates and labour supply. Those who remain employed beyond the pensionable age are more likely to work in jobs with flexible hours of work, and work even fewer hours than people in similar jobs who are not pension age‐eligible. Our results suggest that governments do need to consider the labour supply related incentives provided via its various welfare programmes.     

FISCAL ILLUSION AT THE LOCAL SPHERE: AN EMPIRICAL TEST OF THE FLYPAPER EFFECT USING SOUTH AFRICAN MUNICIPAL DATA1

While South Africa operates a relatively decentralised governance and administrative structure, an important feature of the country's intergovernmental fiscal relations system is the gap that exists between the expenditure responsibilities of sub‐national authorities and their assigned revenue bases. The resulting vertical fiscal imbalance is mainly addressed via significant intergovernmental transfers to provinces and local governments. This factor presents strong a priori grounds for assuming that in the South African context, the heavy dependence of many local governments on intergovernmental transfers may generate fiscal illusion. Despite this, there have not been many empirical studies of fiscal illusion in South Africa's intergovernmental transfer system. This paper extends existing literature on fiscal illusion by using the fiscal year 2005/06 financial and expenditure data from 237 local government authorities in South Africa to evaluate the flypaper variant of the fiscal illusion hypothesis. Empirical results indicate that the marginal effects of municipal own‐source revenues on local expenditure exceed those of intergovernmental transfers. No statistical evidence in support of the flypaper hypothesis within the context of municipal expenditures in South Africa is found.     

Party Politics,Governors, and Economic Policy

In this article, we evaluate the role of elections in governors' state tax policy making. Does it matter for state taxes whether the governor is a Democrat or Republican and whether she is eligible for re‐election or faces a binding term limit? Using a Regression Discontinuity Design and a panel of U.S. states, we find that the manner in which governors of different parties implement different tax policies turns crucially on the incumbent's eligibility for re‐election. Re‐electable Democratic governors increase income taxes relative to similarly situated Republicans, yielding divergence between party policy positions. However, governors facing a binding term limit exhibit the reverse policy difference, resulting in a movement of policy back together.     

Regional effects of federal tax shocks

This article studies the effects of federal tax changes on U.S.‐state‐level income. Utilizing an exogenous tax shock series recently proposed in the literature, we find considerable variation in how federal tax changes affect regional income: estimated state income multipliers range between –0.2 in Utah and –3.7 in Hawaii. Analyzing the determinants of differences in regional tax multipliers suggests that size and composition of the state tax base help explain the observed heterogeneity in the transmission of federal tax policy.     

Mixed duopoly,location choice,and shadow cost of public funds

We examine the relationship between equilibrium and efficient levels of product differentiation in a mixed duopoly, where a welfare‐maximizing public enterprise competes with a profit‐maximizing private firm. We introduce shadow costs of public funding (i.e., the excess burden of taxation). The profits of public firms obtained by the government reduce these costs. We find that in a mixed duopoly, the level of product differentiation is too low for social welfare. This result is in sharp contrast to the private oligopoly, where the level of product differentiation is too high. Finally, we show that when the shadow cost is high, privatizing the public enterprise improves welfare.     

Fear and greed: The evolution of double liability in American banking, 1865-1930

This paper examines the pattern and timing of the enactment of double liability for state banks in the United States prior to the Great Depression. Under double liability, shareholders of failing banks could lose, in addition to the initial purchase price of shares, an amount equal to the par value of shares owned. The results suggest that double liability was adopted by states subject to greater economic risks, where bank failures were more likely, or where the economy and banking sector were more advanced and bank failures would be more costly (i.e., fear), and that single liability was adopted by more rapidly growing states, where the payoff to greater risk-taking was higher (i.e., greed).     

Targeting Teaching Lecture Capture Learning: Do Students Perform Better Compared to Face‐to‐Face Classes?

Online learning has become more prevalent in colleges and universities as new technology is introduced. One such technology is lecture capture, which allows a live lecture to be recorded and packaged with classroom media and delivered online to many more students than a traditional face‐to‐face class. This article studies the selection process and educational outcome differences between students enrolled in a lecture capture and a face‐to‐face course in economic principles. Students could select either course format, both with the same instructor and course requirements, without capacity restrictions. We find that students’ attitudes toward online learning are the chief determinant of their choice of class over demographics, opportunity cost measures, or past online experiences. Additionally, our findings suggest that lecture capture students perform as well as those who take a face‐to‐face course when not accounting for self‐selection. When selection is taken into account, lecture capture is not significantly worse than face‐to‐face.     

School district consolidation: Market concentration and the scale‐efficiency tradeoff

Consolidation is often proposed as a strategy for increasing school district quality without increasing educational funding. However, if consolidation reduces competition in the local school market and reduces efficiency, any savings from exploiting economies of scale may be lost to increased inefficiency. We use a stochastic cost function to investigate these effects for districts in Texas. We find important economies of scale, but we also find that increased market concentration leads to increased cost inefficiency. Finally, we illustrate the practical importance of these two potentially offsetting factors in a simulation that considers consolidating Texas school districts to county‐level districts. We find that failure to consider the effect on competition can lead to large overestimates of the benefits of consolidation.