Employment- and growth effects of tax reforms

Since the mid-1990s almost all OECD countries have engaged in fundamental reforms of their tax systems. There is a trend towards higher social security contributions and lower tax rates on personal and corporate income. This paper explores whether these tax policy measures are effective means for reducing unemployment and accelerating economic growth. Using a Pissarides type search model with endogenous growth, we analyze how savings and the incentive to create new jobs are affected by revenue-neutral tax swaps between wage income taxes, payroll taxes, capital income taxes and taxes levied on capital costs. In our framework, cutting the capital income tax (reducing the double taxation of dividend income) financed by a higher payroll tax turns out to be superior, such a policy mix fosters both employment and growth. Most other tax reforms imply a trade-off between employment and growth.     

Personal income tax progressivity and output volatility: Evidence from OECD countries

This paper investigates empirically the effect of personal income tax progressivity on output volatility using macro data from a sample of OECD countries over the period 1982–2009. Our measure of progressivity is based on the difference between the marginal and the average personal income tax rate for the average production worker. We find supportive empirical evidence for the hypothesis that higher personal income tax progressivity leads to lower output volatility. This effect comes in addition to the stabilizing impact of government size and it is equally important in economic terms. All other factors constant, countries with more progressive personal income tax systems seem to benefit from stronger automatic stabilizers.     

The growth effects of tax rates in the OECD

This paper explores the merits of macro‐ and micro‐based tax rate measures within an open economy “fiscal policy and growth” model. Using annual data for 15 OECD countries we find statistically small, non‐robust long‐run growth effects of macro‐based average tax rates on capital income and consumption, but some evidence for average labour income tax effects. Changes in “micro” marginal income tax rates at both the personal and corporate levels yield statistically robust GDP responses of modest size. Both domestic and foreign corporate taxes appear relevant. In general, tax effects on GDP operate largely via factor productivity rather than factor accumulation.     

Tax decentralization,labour productivity,and employment in OECD countries

Tax decentralization should improve the efficiency of local governments and ultimately boost output growth. However, the empirical evidence is mixed. Decomposing output growth into labour productivity and employment growth, we show that the ultimate effect of fiscal decentralization on growth depends on which factor prevails, thus rendering the direct estimation of tax decentralization on growth ambiguous. Using an instrumental variable approach, with instruments based on institutional similarities and geographic distance, the empirical analysis on a sample of 20 OECD countries shows that the positive and significant effect of tax decentralization on the employment growth rate is offset by the reduction of labour productivity growth, resulting in the absence of any statistically significant effect on output growth.     

Flat income taxation,redistribution and labour market performance

A flat tax rate on labour income has gained popularity in European countries. This article assesses the attractiveness of such a flat tax in achieving redistributive objectives with the smallest distortions to employment. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. Only flat tax reforms that reduce redistribution will raise employment. This finding bolsters the notions from optimal tax literature regarding the equity-efficiency trade off and the superiority of nonlinear taxes to obtain redistributive goals in an efficient way.     

The composition effects of tax-based consolidation on income inequality

Many advanced economies have recently embarked on fiscal austerity. As this has come at a time of high and rising income disparities, policy-makers have fretted about the inequality effects of fiscal consolidations. We shed new light on this issue by empirically investigating the (composition) effects of tax-based consolidations on income inequality, output and labour market conditions for a sample of 16 OECD countries over the period 1978–2012. We find that tax-based consolidations reduce income inequality, but at the cost of weaker economic activity. However, tax composition does matter. Indirect taxes reduce income inequality by more than direct taxes, possibly due to the operation of a positive labour supply channel. Higher indirect taxes increase the price of the consumption basket and create incentives for agents to increase their labour supply. We find this effect to be stronger for middle-aged women. Looking at specific instruments, general consumption taxes and personal taxes are the most suited to reduce inequality while at the same time minimizing the equity-efficiency trade-off.     

The case for international tax co-ordination reconsidered

In a world of high capital mobility, governments may be tempted to undercut each other's capital income taxes to attract capital from abroad. Since such tax competition may have detrimental effects for all countries, European policy makers have debated the introduction of a minimum capital income tax rate within the EU. This paper develops an applied general equilibrium model to estimate the effects of such tax co-ordination on resource allocation, income distribution and social welfare. The model allows for the concern of policy makers that a rise in capital taxes within the EU may cause a capital flight out of Europe. Capital flight will indeed reduce the welfare gain from tax co-ordination within Western Europe, but a positive net gain will remain, although it is likely to be well below 1% of GDP. The gain from co-ordination will be unevenly distributed across European countries, due to differences in economic structures and in the social preference for redistribution. Moreover, even if the median voter's gain from tax co-ordination may be small, the gains for the poorer sections of society may be quite large.     

Time-consistent taxation in a dynastic family model with human and physical capital and a balanced government budget

Abstract .  This paper analyzes optimal, time consistent taxation in a dynastic family model with human and physical capital and with a balanced government budget. When tax revenue is used for publicly provided consumption or lump-sum transfers, leisure would be higher than its social optimum. Pareto optimal taxation requires taxing capital income more heavily than labour income and subsidizing investment at the same rate of the tax. Also, it requires either subsidizing labour at the same rate as a consumption tax or subsidizing consumption at the same rate as a labour income tax, and hence it is not a practical guide to policy. Further, a consumption tax, or equivalently a uniform income tax with investment subsidies at the same rate, can be improved on by taxing capital income more heavily than labour income.     

The impact of corporate and personal income taxes on the location of firms and on employment: some panel evidence for the Swiss cantons

The impact of corporate income taxes on location decisions of firms is widely debated in the tax competition literature. Tax rate differences across jurisdictions may lead to distortions of firms’ investment decisions. Empirical evidence on tax-induced relocation and subsequent economic development in the US and Europe is still inconclusive. Much the same applies to Switzerland. While there is some evidence on personal income tax competition between Swiss cantons, evidence on the impact of intercantonal corporate income tax differences on the location of business within Switzerland is missing. In this paper, we present econometric evidence on the influence of corporate and personal income taxes on the regional distribution of firms in 1981 and 1991 and on cantonal employment using a panel data set of the 26 Swiss cantons from 1985 to 1997. The results show that corporate and personal income taxes deter firms to locate in a canton and subsequently reduce cantonal employment.     

Taxes and firm investment

We investigate the firm-level investment response to unanticipated narrative shocks to average personal and corporate tax rates using a universal micro dataset of publicly-traded U.S. firms for the post-1976 period. Using local projections, we show that: (i) corporate tax shocks have significant effects on investment while personal tax shocks do not; (ii) corporate income tax responses are negative overall, and this result is driven by smaller firms who face larger borrowing constraints, especially when the accompanying monetary policy is contractionary or output gap is slack; (iii) there is some evidence of positive personal income tax responses during monetary contractions by dividend-paying firms, which is consistent with the recent literature.     

Growth effects of structural reforms in Southern Europe: the case of Greece,Italy, Spain and Portugal

This paper develops a semi-endogenous growth model for analysing the intertemporal effects of structural reforms in Southern European countries (Italy, Spain, Portugal and Greece). The model follows the product-variety paradigm in a semi-endogenous setting, and includes a disaggregation of labour into different skill groups. We use a comprehensive set of structural indicators in order to calibrate the model to important macroeconomic ratios and levels of productivity and employment. Our results show that structural reforms yield significant economic gains in the medium and long run. The results point to the importance of product market reforms and labour market related education and tax reforms as the most promising areas of structural policy interventions. This paper also argues for placing more emphasis on education policy which is key in upgrading the labour force, especially in these countries where the share of low skilled labour is among the highest in the euro area.     

生态赤字税：绿色发展与税制改革*

本文在量化生态占用并评估生态价值基础上,提出运用税收实现超额生态占用价值补偿的税收方案,也称生态赤字税。根据税制生态化的改革思路,本文运用CGE模型分析了征收生态赤字税和降低所得税的政策效应。本文研究发现：(1)在各税收方案中,生态赤字减少,就业增加,支持双重红利假说,全行业中间投入减少相对总产出减少更大,名义GDP保持增长;(2)实际GDP在生态赤字税基础上仅减少企业所得税的方案中下降,同时减少个人所得税则能实现增长,此时减税额低于生态赤字税收入;(3)在开征生态赤字税同时,降低个人所得税在保持经济增长方面较好,降低企业所得税在减少生态赤字方面较好,但降低企业所得税所减少的生态赤字价值低于降低个人所得税时劳动和资本增加值的提高。本文建议在完善生态占用核算基础上开征生态赤字税,并减轻所得税,促进经济增长由资源环境消耗转向劳动和资本投入的绿色发展。     

THE INCOME REDISTRIBUTION EFFECT OF CHINA'S PERSONAL INCOME TAX: WHAT THE MICRO‐DATA SAY

This article uses continuous micro‐level data to investigate the income redistribution effect of the personal income tax (PIT) in China beginning in 1997. We find that the average tax rate plays a larger role in determining the income redistribution effect of PIT than tax progressivity does. Although tax progressivity decreased as a result of rising personal incomes and a constant PIT policy prior to 2005, the income redistribution effect of the PIT improved as a result of the higher average tax rate. The tax reform beginning in 2006 increased tax progressivity while decreasing the average tax rate, thereby weakening the income redistribution effect of the PIT. Further analysis indicates that the middle‐income group was the only net loser before 2005, but it benefited from the PIT policy reform. A cross‐country comparison shows that China has a lower PIT burden and higher progressivity than developed countries; in fact, China's levels of progressivity and tax burden are similar to those of Latin American countries. (JEL H24, D31, H31)     

The Household, Time Use and Tax Policy

This paper is concerned with modelling household decisions andthe welfare effects of tax policy. It seeks to emphasise theimportance of a model that incorporates household productionand can take account of the evident female labour supply heterogeneityacross two-parent families. If, after having children, someproportion of households substitute domestic for market laboursupply, the income and consumption variables used as the taxbase in most countries may be poorly correlated with livingstandards. Taxes and welfare programs based on these variablesmay increase inequality by shifting the overall tax burden tolow and middle wage families with both partners in work, awayfrom families with much higher wages and in which only one memberworks to earn the same joint market income. The paper combinesdata on time use, income, taxes and benefits to show how theytrack female labour supply over the life cycle, resulting inmuch higher tax burdens on two-earner households. (JEL D13,D91, H31, J22)     

International oligopoly,barriers to outsourcing and domestic employment

In this paper we analyze the impact of barriers to outsourcing on domestic employment in an oligopolistic context. We show that although an outsourcing tax makes domestic labour cheaper, its employment effect is ambiguous due to strategic considerations. Analyzing international policy interdependence, we also show that, although a unilateral tax (subsidy) by a country must raise its domestic employment, this may be counterproductive in a Nash policy equilibrium. Finally, both a credit crisis and increased product differentiation tend to worsen the employment effects of an outsourcing tax. Our central findings are robust to both Bertrand and Cournot modes of competition.     

Taxes,female labour supply and household income: differences between the Netherlands and the Federal Republic of Germany

The article investigates the effect of taxes and social premiums on female labour supply and household income. A comparison is made between labour supply and household income between the Netherlands and the Federal Republic of Germany in 1992. A discrete choice model for labour supply is used in which taxes and social premiums are implicitly incorporated. As male labour supply is highly inelastic an individual, male chauvinist model is used. The estimated models are used to simulate the effect of the differences in the tax and social premium system on the differences in labour supply and income between both countries. The results indicate that labour force participation is higher the more individualized the system. The German system leads to a lower tax burden compared to the Dutch system. It is concluded that differences in the tax and social premium system between both countries have hardly any influence on the differences in the inequality of net household labour income. There is evidence that the German system leads to a slightly more unequal distribution of household income. It is also concluded that although the tax and social premium system does influence labour supply and income, it can be doubted whether these effects are substantial.     

个人所得税的累进性与再分配效应——以湖北省为例

以湖北省城镇调查数据为分析对象,以指数为工具,本文实证考察了我国个人所得税的累进性及再分配效应。得到的结论是我国个人所得税再分配效应很弱,但其原因并不在于税收的实际累进性小,而在于个人所得税的平均税率低,税收规模很小。同时,在各类收入中,工资性收入的个人所得税累进性很强,经营性收入及财产性收入的个人所得税累进性较差,甚至出现累退性。提高个人所得税规模、加强对经营性收入及财产性收入的税收征管、以家庭为单位征收是个人所得税进一步改革的方向。     

An input-output approach to the estimation of employment requirements in Europe

This study reports the results of an attempt to analyse the employment requirements per one million dollars of final demand on the basis of an input-output model, in which the standard technology matrix is partitioned into domestic and import input coefficient matrices for twelve European countries. International comparisons of employment requirements indicate that the labour productivity is higher for high income countries while employment requirements per one million dollars of final demand is less closely associated with the size of the country. Our results demonstrate that the total employment requirements estimated on the basis of the total input coefficients matrix or the domestic coefficients matrix retain the same ordinal ranking of the sectors. For developing countries, where the data are not available for domestic and import coefficients matrix separately, the methodology of estimating employment requirements (per unit of final demand) through total coefficients matrix may be adopted since our experience indicates that ranking of the sectors in terms of labour productivity is not altered between two approaches for twelve European countries.     

赡养系数与个人所得税税制改革

文章在估算城镇居民收入分布函数的基础上,对考虑家庭赡养系数的个人所得税税制改革的政策效果进行了模拟分析。结果发现,在保证个人所得税总税收收入基本不变的前提下,在扣除标准中考虑赡养系数后,中低收入家庭的所得税负担有所减轻,高收入家庭的税收负担相应加重;相当一部分中等收入家庭(占总人口11.44%)的边际税率下降了5个百分点,这对刺激就业有着积极的影响。因此,考虑赡养系数能够使个人所得税更好地体现税收公平并发挥调节收入分配的职能。