On the optimal progressivity of the income tax code

This paper computes the optimal progressivity of the income tax code in a dynamic general equilibrium model with household heterogeneity in which uninsurable labor productivity risk gives rise to a nontrivial income and wealth distribution. A progressive tax system serves as a partial substitute for missing insurance markets and enhances an equal distribution of economic welfare. These beneficial effects of a progressive tax system have to be traded off against the efficiency loss arising from distorting endogenous labor supply and capital accumulation decisions.Using a utilitarian steady state social welfare criterion we find that the optimal US income tax is well approximated by a flat tax rate of 17.2% and a fixed deduction of about $9,400. The steady state welfare gains from a fundamental tax reform towards this tax system are equivalent to 1.7% higher consumption in each state of the world. An explicit computation of the transition path induced by a reform of the current towards the optimal tax system indicates that a majority of the population currently alive (roughly 62%) would experience welfare gains, suggesting that such fundamental income tax reform is not only desirable, but may also be politically feasible.     

Do lack of transparency and enforcement undermine international risk-sharing?

This paper studies the extent to which poor institutions compromise risk-sharing. We model a multilateral organization as a social contract that provides insurance to members. Countries privately observe the realization of a performance variable with a verification cost that differs across countries, reflecting the “transparency” of institutions. When the level of transparency is exogenous, the optimal contract provides complete expected risk sharing across countries and states. Poor transparency and enforcement reduce consumption and result in insurance rationing. When a country can increase transparency endogenously, this generates an externality and moral hazard. We first characterize the outcome when the multilateral agency can influence members’ institutions by choosing the countries’ level of effort. Next we derive a tax/subsidy scheme that can induce countries to choose the socially optimal level. JEL Classification Numbers D8, F3 We are grateful to Biung-Ghi Ju, Ted Juhl, Donald Lien, Joseph Sicilian and Jianbo Zhang for helpful comments. We are especially grateful to an anonymous referee for comments that improved the paper substantially.     

Can tax convexity be ignored in corporate financing decisions?

The standard modeling practice in corporate finance has been to assume a linear tax schedule. This paper extends the structural contingent-claim model of corporate finance to incorporate a more realistic convex tax schedule. It is shown that tax convexity raises the optimal default boundary and thus increases the likelihood of default, and also reduces the optimal leverage ratio. While the former effect seems insignificant in general, the effect of tax convexity on the optimal leverage ratio can be quantitatively significant. We conclude that tax convexity should not be ignored in corporate financing decisions, and theoretical models should use a convex tax schedule instead of a linear one. Thus, the short answer to the question in the title is “No”.     

社保基金境外投资风险及其防范

随着《全国社保基金境外投资管理暂行办法》的即将出台,社保基金将要进行海外投资。社保基金海外投资将遇到信息披露和交易成本问题、市场流动性风险、国家风险和税收等问题,为了防范风险必须要加强对社保基金境外投资的风险管理。     

Structuring Deposit Insurance for a United Europe

This paper analyses the difficulties associated with imposing a unified deposit insurance scheme in a unified Europe. Specifically, it investigates the determinants of optimal deposit insurance in light of the Commission's 1994 decision requiring mandatory minimum coverage and encouraging a single unified deposit insurance structure. Issues of deposit insurance premiums and tax burden are analysed in the context of a general equilibrium-type model. The results indicate that taxes, the optimal degree of deposit insurance, and societal risk aversion are all interrelated in such a structure. Therefore, a common insurance system may not be feasible nor appropriate for a first best solution; co-ordination and even unified taxation may be necessary. At the minimum, exceedingly close macroeconomic policy co-ordination will be necessary for the single market for financial services to come to fruition and achieve stability.     

Optimal tax-timing and asset allocation when tax rebates on capital losses are limited

This article studies the portfolio problem with realization-based capital gain taxation when limited amounts of losses qualify for tax rebate payments, as is the case under current US tax law. When the tax rate applicable to realized losses exceeds that on realized capital gains, it can be optimal to realize capital gains immediately and pay capital gain taxes to regain the option to use potential future losses against a higher tax rate. This incentive adds an entirely new and as yet unstudied dimension to the portfolio problem. It causes risk averse investors to hold more equity and attain higher welfare levels than is the case when trading under a tax system that seeks to collect the same amount of taxes, but does not allow for tax rebate payments. This is because the benefit to these investors from having their losses subsidized is greater than the suffering from having profits taxed at a higher rate.     

On the optimal provision of social insurance: Progressive taxation versus education subsidies in general equilibrium

In this paper we compute the optimal tax and education policy transition in an economy where progressive taxes provide social insurance against idiosyncratic wage risk, but distort the education decision of households. Optimally chosen tertiary education subsidies mitigate these distortions. We highlight the quantitative importance of general equilibrium feedback effects from policies to relative wages of skilled and unskilled workers: subsidizing higher education increases the share of workers with a college degree thereby reducing the college wage premium which has important redistributive benefits. We also argue that a full characterization of the transition path is crucial for policy evaluation. We find that optimal education policies are always characterized by generous tuition subsidies, but the optimal degree of income tax progressivity depends crucially on whether transitional costs of policies are explicitly taken into account and how strongly the college premium responds to policy changes in general equilibrium.     

Corporate capital structure and pension-funding strategy

This article provides an integrated analysis of pension funding and corporate financing strategies in the presence of default risk. The article shows that when the marginal personal income tax rate is constant, the financing decision with respect to pension funding is influenced entirely by tax considerations. When the marginal personal income tax is progressive, the optimal financing of pension funding depends on the cyclical nature of the firm (as characterized by the sign of beta), the riskiness of pension assets, and ERISA regulations concerning the pension-benefit guaranty rate, the marginal pension insurance premium and the firm's legal responsibility for its unfunded pension obligations. It is shown that a necessary condition for partial pension funding is that the marginal insurance premium imposed by PBGC must be less than actuarially fair, and a necessary condition for pension funding to be financed by both debt and equity is that beta must be positive.     

Redistribution as Social Insurance and Capital Market Integration

In this paper we claim that enhanced economic integration can call for an increase in redistribution among workers. When individuals are risk averse and no human capital insurance is available, the share of workers who choose to invest in specific human capital will be inefficiently low. Redistribution among workers plays the role of the missing insurance market by making the investment in the specific skills more attractive. Capital market integration has two different effects. On the one hand it makes labour income taxation more distortionary, therefore reducing the optimal tax rate on labour. On the other hand, it increases the variance of specific labour wage and widens the scope for risk protection of specific human capital through the redistribution implemented by a labour income tax. We show that the insurance effect of redistribution can be stronger than the distortionary effect, so that the optimal tax rate on labour income can increase when capital markets become more integrated.     

Do personal taxes affect capital structure? Evidence from the 2003 tax cut

Because the personal tax treatments of interest and dividend income likely affect the relative cost of debt and equity financing, a sharp change in tax treatment could affect firms' optimal leverage. This paper examines the effect of the 2003 equity income tax cut on firms' debt usage. Because this tax cut affected only individual investors, we can use a difference-in-differences method to identify the effect of personal tax on firms' leverage. Previous research has found that the 2003 tax cut encouraged dividend payouts and reduced the cost of equity, but it provides no link to equilibrium leverage ratios. We estimate that the tax cut causes the affected firms' leverage to decrease by about 5 percentage points. Furthermore, we show that the effects of the tax cut are stronger for firms with lower marginal corporate tax rates and for firms that are not financially constrained, consistent with our theoretical predictions. Overall, we find strong evidence that personal tax is an important determinant of firms' optimal leverage.     

税务征收体制下的社会保险费征管制度建设研究

我国社会保险费征管体制改革正在不断深入。当前,社会保险费征管仍存在制度设计有待完善、法律依据不够清晰的问题。本文基于税收征管视角,对社会保险费征管制度进行了重新审视,在全面梳理了制约社会保险费征管制度完善的限制性因素的基础上,从科学设置社会保险费征管前置程序、全面构建社会保险费征管的保障程序等多个方面,对将社会保险费征管融入税收征管流程的可行性进行了分析和探讨,以期为我国社会保险费征管制度的完善提供参考。     

Indirect tax reform and the role of exemptions

This paper examines the question of whether indirect tax rates should be uniform, using four different modelling strategies. First, marginal tax reform is examined. This is concerned with the optimal direction of small changes in effective indirect tax rates and requires considerably less information than the calculation of optimal rates. Second, the welfare effects of a partial shift from the current indirect tax system in Australia towards a goods and services tax (GST) are considered, with particular emphasis on differences between household types and the role of exemptions. Third, in view of the stress on a distributional role for exemptions of certain goods from a GST, the potential limits to such redistribution are considered. The fourth approach examines the extent of horizontal inequity and reranking that can arise when there are non‐uniform tax rates. These inequities arise essentially because of preference heterogeneity.     

The Distributional Implications of Income Under‐Reporting in Hungary*

The ability and inclination of specific social groups to evade tax vary widely, and this leads to considerable variation in the actual tax burden on individuals with similar levels of income. Thus, ignoring tax evasion can be seriously misleading in terms of the distributive and fiscal effects of the tax system. This paper estimates the distributional implications of income tax evasion in Hungary, based on a random sample of the administrative tax records of nearly 230,000 individuals. Gross incomes declared in the administrative tax returns are compared with incomes stated in a nationally representative household budget survey. Our estimates show that the average rate of underreporting is 9–13 per cent, though this conceals a big difference between the self‐employed (who hide the greater part of their income) and employees. The estimates are likely to be lower bounds. These rates are used in a tax– benefit microsimulation model to calculate the fiscal and distributional implications of under‐reporting. Tax evasion reduces households' personal income tax payments by about 16–20 per cent. While the poverty rate increases only slightly, income inequality rises significantly, suggesting that high‐income households tend to evade tax proportionately more. Finally, we find that tax evasion largely reduces the progressivity of the tax system.     

An Analysis of the Effect of Tax Policy on Health Insurance Purchases by Risk Group

There is an extensive body of literature dealing with the welfare loss associated with generous levels of health insurance as a function of the tax subsidy. The theoretical discussion in this study considers the effect of the tax subsidy on pooling within plans, and suggests the hypotheses that the tax subsidy will have a disproportionately positive effect on the likelihood that a high‐risk worker will be eligible for and participate in employment‐based coverage, while the effect of the tax subsidy on plan generosity will be greatest for low‐risk employees. If coverage of high‐risk individuals enhances social welfare, this result may offset, at least in part, the welfare loss associated with generous plans. Data from the 1987 National Medical Expenditure Survey are used to test these hypotheses. The results provide evidence that the subsidy works to expand risk pools in the employment‐based health insurance market.     

社会保障税:优化社会保障筹资模式的最佳选择

由于我国社会保险面临转轨成本、资金缺口和人口老龄化等三重压力,因此,通过依照职工工资总额征收养老保险金、失业保险金、医疗保险金、工伤保险金及生育保险金的方式所筹集的社会保障基金难以满足支出的需求。建议尽快由依靠企业统筹社会保障基金收费过渡到依靠税务机关征收社会保障税,以法律手段取代行政手段。这既是建立稳定的社会保障基金筹资机制、保证社会保障基金稳定来源的必需,也是适应社会主义市场经济发展需要、优化社会保障筹资模式的最佳选择。     

政策性农业保险经营技术障碍与巨灾风险分散机制研究

本文从我国政策性农业保险的发展现状和特征出发,分析了政策性农业保险的主要试点模式,认为目前各地的农业保险试点重财税等政策索要,轻经营技术研究,困扰我国农业保险发展的长期障碍因素并未根除。在深入分析农业巨灾风险难以分散的特性以及对农业保险经营影响的基础上,本文提出了构建我国多层次农业巨灾风险保障体系的建议,包括直接保险公...     

Income repatriation decision for multinational corporations: Tax issues

This paper analyzes the existing asymmetry in the US corporate tax law governing the determination of foreign tax credits earned by US firms with foreign subsidiaries. The existing asymmetry results in the US government de facto holding foreign currency put options against US firms with foreign subsidiaries. Combined with the exchange rate volatility, this tax law asymmetry reduces the effective foreign after-tax rate of return and, thus, makes it profitable for US firms to repatriate their foreign source income earlier even when the foreign after-tax rate of return is higher than the domestic rate. Although this paper identifies this asymmetry in the tax law and analyzes its potential effect on the timing of foreign source income repatriation, it is an open question as to the economic significance of this tax code feature provided the firms’ ability to curry the unused tax credit forward for up to 10 years.     

基于统一税收制度下的银行存款保险制度改进研究

多年来,我们对于存款保险制度安排的创新不足,对社会福利的影响研究较少,研究重点主要集中在基于银行缴纳保费的存款保险计划制定、定价方法、道德风险的规避及对银行体系的效用方面。事实上,只有通过统一的税收制度建立存款保险计划才能提高社会福利,并在该框架下实现对民间借贷的有效调节。     

基于Copula函数的保险公司经济资本配置研究

经济资本的度量及配置是风险管理的核心内容。本文利用Copula函数构建保险公司总体风险的联合分布函数,结合TCE方法来度量保险公司经济资本,并利用动态规划方法对经济资本最优配置模型求解。最后结合中国人民财产保险股份有限公司的数据进行实证。通过研究发现,我国财险公司内部偿付能力状况较好,但险种结构有待优化。     

制度变迁视角下的社会保险费征缴体制研究

自我国建立社会保险制度以来,采用了三种不同的社会保险费征缴体制,即劳动部门全责征收的体制、劳动核定、税务征收的核征分离体制、税务部门全责征收的体制,这是社会保险费征缴体制变迁的结果。社会保险费征缴体制是社会保障体系建设的重要重成部分,系统分析社会保险费征缴体制变迁的一般规律和发展方向,对于指导社会保险费征缴体制改革,加强社会保障体系建设具有重要意义。