Tax effects in the dutch bond market

In this paper an analysis of the Dutch bond market is made. The technique used is linear programming. Given the fact that coupon income and capital gains are taxed differently and that some investors are tax-exempt in the Netherlands, it is shown that there are overpriced bonds in the market. This is as can be expected. But it is found that there are bonds that a rational investor would never hold in his portpolio, whatever the tax rate the investor has to pay on coupon income. Given the fact that the Dutch bond market is very illiquid for some bonds, an analysis of the effects of bid-ask spreads is made. It is shown that the effect of these spreads cannot explain the existence of bonds that are overpriced. It is not clear where these remaining overpricings stem from.     

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.     

Taxation and Housing Tenure Choice: The Case for Moderate-Income Homeownership

This study explores the financial value of homeownership for households in the 15% Federal tax bracket. Earlier studies concluded homeownership was only for households with high marginal tax rates, but they neglected how vacancy and turnover rates factor into rental prices. Principal innovations here include deriving long-run equilibrium rent-to-value ratios for the rental market and contrasting investor holding periods with lengths of household tenures. Tax regime simulations are performed for homeowner deductions and investor capital gains tax rates.     

Implications of productive government spending for fiscal policy

The standard assumption in macroeconomics that government spending is unproductive can have substantive implications for tax and spending policy. Productive government spending introduces a positive feedback between the tax rate, the productive capacity of the economy, and tax revenue. We allow marginal tax revenue to be optimally allocated between productive subsidies to human capital and utility-enhancing government consumption and calculate Laffer Curves for the US. Productive government spending yields higher revenue-maximizing tax rates, steeper slopes at low tax rates and higher peaks. The differences are particularly pronounced for the labor-tax Laffer curve. The use of tax revenue is an important determinant of the actual revenue that a tax rate increase generates.     

MARGINAL COMMODITY TAX REFORMS: A SURVEY

Abstract.  As noted 30 years ago by Martin Feldstein, optimal taxes may be useless for practical purposes and emphasis should instead be placed on the possibility of enhancing welfare by reforming existing tax rates. In this perspective, marginal commodity tax reforms are gaining increasing attention due to political and economic constraints on large reforms of direct (or indirect) taxation. In this paper, we summarize the main features and results of the literature on marginal commodity tax reforms pioneered by Ahmad and Stern, further developed by Yitzhaki and Thirsk and recently reinterpreted by Makdissi and Wodon. We establish new links to other fields of research, namely the literature on the use of equivalence scales and on poverty measurement. We also critically examine some issues associated with the implementation of marginal tax reforms with special reference to the calculation of welfare weights and revenue effects. Finally, we suggest directions for future research on poverty-reducing commodity tax reforms.     

A Note on the Determinants of Public Dissatisfaction with Government: Economic and Political Factors Affecting the Public's Attitude toward Government

This study empirically identifies both the economic and political determinants of the public's dissatisfaction with government in the United States. Using annual survey data on the public's dissatisfaction with government obtained for the years 1965–1996, it is found that the Vietnam War, Watergate, oil price shocks and higher federal marginal income tax rates resulted in elevated levels of the public's dissatisfaction with government, whereas increases in housing prices and a rising Dow Jones industrial average reduced the public's dissatisfaction with the government.     

How should a convertible bond be decomposed?

In this paper, a new decomposition approach for valuing convertible bonds (CBs) is presented. Through developing an appropriate integral representation for the value of convertible bonds, we show that an extra premium associated with the holder??s early conversion right exists in addition to the traditional split of a convertible bond into a straight bond plus an option. Three distinct cases, CBs with zero-coupon, continuous coupon and discrete coupon payments, are discussed in this article. Also, to validate our integral formulation, a numerical implementation for the solution of the CB value is conducted and some preliminary results are presented.     

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.     

An Empirical Analysis of the Impact of Government Tax and Auditing Policies on the Size of the Underground Economy:

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This study empirically examines the impact of federal income tax rates, IRS penalties on unpaid tax liabilities, and audit rates of the Internal Revenue Service on the size of the underground economy in the United States, Recent data generated by Edgar Feige are used to measure the size of the underground economy. Based on ordinary least squares estimates, it is found that the maximum marginal personal income tax rate raises the size of the underground economy. In addition, the size of the underground economy is found to be a decreasing function of both the percentage of tax returns audited and the penalties imposed by the IRS on unpaid taxes.     

Federal Income Tax Reform in the United States: How Did It Happen? What Did It Do? Where Do We Go from Here?

Abstract . The 16th Amendment to the U.S. Constitution in 1913 provided the legal basis for progressive federal income taxes. They now yield revenues of about $450 billion annually. Tax base erosion eventually produced a levy in serious violation of norms of allocation efficiency, distributional equity, and macroeconomic performance. Vested private interests influenced legislators by propaganda and campaign contributions to minimize their tax burdens at the expense of less wealthy taxpayers. The result was an irrational and badly flawed tax structure. In 1981 the maximum marginal tax rate on income from property and wealth was significantly reduced along with other bracket reductions. The income tax reform movement culminated in 1984 to 1986. It expanded the base of the tax while reducing marginal rates as well as brackets, with little change in the distribution of the burden among different income groups but achieving some greater equity in tax liabilities for those with similar incomes.     

Are There Tax Arbitrage Opportunities in Private Rental Housing Markets?

Tax arbitrage opportunities in rental housing markets arise when high bracket taxpayers exploit the tax shelter and conversion features of the tax treatment of rental housing and as a consequence offer low bracket taxpayers rental housing at a cost lower than if they purchased the same quantity of housing for owner occupation. A microdata set has been employed to estimate the size of these tax arbitrage opportunities with respect to 1907 properties owned by Australian landlords. The measure of tax arbitrage opportunities is the breakeven tax rate at which the maximum rental rate a potential occupant is prepared to pay before turning to purchased housing is equal to the landlord's reservation rental rate. Potential occupants with marginal tax rates below the breakeven tax rate find that renting has a relative cost advantage over home purchase. When agency costs (the costs incurred in managing landlord-tenant relationships) are included in the tax arbitrage model, our estimates of the breakeven tax rate indicate that home purchase has a relative cost advantage over renting for most potential occupants. Renting is only financially attractive to low tax bracket individuals. This finding is consistent with Australian tenure patterns. However, there are more puzzling results. A majority of landlords belong to tax brackets below the top bracket, landlords in the lowest tax brackets typically make below normal profits, and reservation rental rates at the bottom of the rental housing market are relatively high. Down payment requirements, lock-in effects, and rent clientele groups are put forward as possible explanations for these findings.     

税收累进性测度的改进：方法、比较和应用

提出判断税收累进性的边际效应方法：当总收入基尼系数的税收边际效应大于0时,该税收具有累进性特征;并将税收边际效应作为测度指数。边际效应指数与K指数具有完全相同的符号,不同税种具有可加性,它比K指数更为稳健,且赋予了税收累进性新的经济含义：税收对总收入基尼系数贡献率大于平均税率。同时还着重讨论几种测度税收累进性指数的关系,对各种测度指数进行了实证,发现S指数存在一定程度的缺陷。     

Taxation, Incentives and Disincentives, and Human Motivation

A bstract . In the national tax debate, many ignore the effect of taxes on human motivation. High—and rising—marginal tax rates must be depressing, hampering and frustrating. They do not spur people on to better performance nor do they reward socially necessary or desirable economic behavior. What they encourage is distortion of resource allocation , legal avoidance and illegal evasion , as well as decline in human and capital resources. At both ends of the income scale they approach confiscation. Land apart from its improvements is taxed lightly when it should be the revenue source of choice taxed the most heavily, while the heaviest exactions discourage labor, enterprise and all human effort as well as savings. Equity and fairness along with the social consequences argue for large cuts in high tax rates at the top and at the bottom of the income scale.     

Analyzing female labor supply — Evidence from a Dutch tax reform

Among OECD countries, the Netherlands has an average female labor force participation, but by far the highest rate of part-time work. This paper investigates the extent to which married women respond to financial incentives. We exploit exogenous variation caused by a substantial Dutch tax reform in 2001. Our main conclusion is that the positive significant effect of the tax reform on labor force participation dominates the negative insignificant effect on working hours. The latter contradicts the common empirical finding of positive wage elasticities. Our preferred explanation is that women respond more to changes in tax allowances than to changes in marginal tax rates.     

New and Current Evidence on Determinants of Aggregate Federal Personal Income Tax Evasion in the United States

Using the most current data available, this study seeks to identify any new as well as traditional determinants of personal income tax evasion. A variety of empirical estimates find that income tax rates, the IRS audit rate and IRS penalty interest rates, and the unemployment rate all influence tax evasion. In addition, rarely investigated variables including the tax‐free interest rate, the public's job approval rating of the president, and the public's dissatisfaction with government, along with previously unstudied variables, namely, the real interest rate yield on Moody's Baa‐rated long‐term corporate bonds and the real interest rate yield on three‐year Treasury notes, also affect income tax evasion.     

Identifying strategic interactions in Swedish local income tax policies

This paper uses data on Swedish local governments to test for strategic interaction in local tax setting. We make use of a number of indirect predictions from the theories of tax competition and yardstick competition in order to test for the presence of strategic interaction in these forms. Using such additional predictions of the theories serves a twofold purpose—first it helps us establish if the spatial coefficient is due to strategic interactions or merely reflecting spatial error correlation, and second, it helps identify the source of interaction. The analysis provides strong evidence for spatial correlation in tax rates among Swedish local governments. Moreover, we find weak evidence of tax competition effects in the setting of tax rates.     

TAX COMPETITION AS A CAUSE OF FALLING CORPORATE INCOME TAX RATES: A SURVEY OF EMPIRICAL LITERATURE

Abstract Since the mid 1980s, tax rates on corporate income have declined in most industrialized countries. Tax competition between countries for mobile capital has frequently been mentioned as an explanation for this development. A vast empirical literature dealing with tax competition for mobile capital has emerged. This paper categorizes and summarizes the existing empirical studies on this issue. Particular focus is placed on the isolation of the substantive implications the quantitative study outcomes convey. Given the empirical evidence surveyed, it appears that tax rates indeed decline due to tax competition between countries, and in particular due to competition for profits. In addition to summarizing the substantive implications of the existing empirical literature, the paper addresses the question of whether the existing studies can convincingly isolate tax competition as a driver of falling corporate income tax rates.     

The investment decision of a Multinational Firm under uncertain quantity restrictions

In this paper we analyze the allocative investment decisions of a Multinational Firm (MNF) when it faces uncertain quantity restrictions such as a voluntary export restraint or a quota imposed by the host government. The model with uncertain quantity restrictions is analyzed further by introducing additional uncertainties such as a foreign tax rate, transfer prices, foreign exchange rates and foreign demand. The MNF invests more in the host country due to uncertain quantity restrictions. The risk averse MNF invests more in the host country despite its uncertain tax rate if the transfer price is less than the expected marginal revenue loss due to the uncertain quantity restriction. The uncertain transfer price leads the MNF to invest more in the foreign country if the tax rates are dissimilar between the two countries. Foreign demand uncertainty and foreign exchange rates uncertainty have the same effects on capital allocation between the host country and home country. In particular, we derive the condition under which the direction of investment is unambiguous.     

Using ex-day returns to separate the tax and information effects of dividend changes

In this paper, the information content of dividends is tested by examining the abnormal return on the announcement date. To address the potentially confounding effects of the tax penalty, the abnormal exdividend day return is used to separate stocks for which dividends impose a tax penalty on marginal investors from stocks for which dividends provide a tax benefit to marginal investors. This separation uncovers results that support the information content hypothesis; dividend increases result in positive abnormal announcement day returns even for stocks whose marginal investors are averse to dividends.