The Earned Income Tax Credit: Targeting the poor but crowding out wealth

This paper quantifies the individual, aggregate and welfare effects of the US Earned Income Tax Credit (EITC). In particular, we analyze the labour supply and saving responses to changes in tax credit generosity and their implications for prices and welfare. Our results show that the EITC is a subsidy on labour income and a tax on savings. An increase in EITC generosity raises labour force participation, reduces savings for many and provides insurance to working poor households. The EITC reduces earnings inequality but increases the skill premium and wealth inequality. A 10% increase in tax credit generosity increases welfare by 0.31% and benefits the majority of the population.     

Does labour supply respond to a flat tax?

We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on the labour supply of men and women. We apply a weighted difference‐in‐difference regression approach and instrumental variables to estimate labour supply functions using a panel dataset. The mean regression results indicate that the tax reform led to a statistically significant increase in hours of work for men but had no effect on work hours for women. However, we find a positive response to tax changes in both tails of the female work hour distribution. We also find that the reform increased the probability of finding a job among both men and women. Despite significant variation in individual responses, the aggregate labour supply elasticities are trivial. This suggests that reform‐induced changes in labour supply are an unlikely explanation for the amplified personal income tax revenues that followed the reform.     

Flattening the Effective Marginal Tax Rate Structure in Australia: Policy Simulations Using the Melbourne Institute Tax and Transfer Simulator

This article uses the Melbourne Institute Tax and Transfer Simulator to examine the effects of a reduction in the means‐tested benefit taper, or withdrawal, rates in Australia to 30 per cent. That is, all taper rates of 50 per cent and 70 per cent in the March 1998 benefit system are reduced to 30 per cent, while leaving all basic benefit levels unchanged. This change is therefore expected to ‘flatten’ the tax structure by reducing the high marginal tax rates applying to those with relatively low incomes and increasing the marginal tax rates of medium incomes. Simulations in which all individuals are assumed to remain at their pre‐reform labour supply levels are compared with behavioural simulations in which the majority of individuals are free to adjust the number of hours worked. The results reflect only the supply side of the labour market. The database used is the 1997‐98 Survey of Income and Housing Costs, so that weekly incomes are based on the financial year 1997‐98. The comparison shows that, for sole parents, accounting for behavioural effects of the reform results in a lower estimated expenditure for government, whereas for couples, accounting for behavioural effects results in a higher estimated expenditure.     

Income Shifting within a Dual Income Tax System: Evidence from the Finnish Tax Reform of 1993*

Dual income tax systems can suffer from income that shifts from progressively taxed labour income to capital income, which is taxed at a lower, flat rate. This paper empirically examines the 1993 Finnish dual income tax reform, which radically reduced the marginal tax rates on capital income for some, but not all, taxpayers. We measure how overall taxable income and the relative shares of capital income and labour income reacted to the reform. We find that the reform led to a small positive impact on overall taxable income, but part of the positive response was probably offset by income shifting among the self‐employed.     

Towards a Negative Income Tax System for Australia

The undue complexity of the Australian tax-transfer system is outlined as are the associated high effective marginal tax rates for many individuals and families. A negative income tax system is a possible solution to these problems.
The most radical version of negative income tax is a 'basic income/flat tax' system which combines universal tax credits (that vary according to presence of children, disability etc.) and a flat tax rate on private income. Using NATSEM's microsimulation model STINMOD it is found that to ensure that no current social security beneficiaries become worse off under such a system would either be very expensive to introduce or require a tax rate that is likely to be unacceptably high. Less radical versions of negative income tax are also costed, incorporating the possibility of varying tax rates, the tapering out of tax credits, and placing some restrictions on the granting of tax credits. This makes negative income tax look more feasible.
The analysis does not incorporate behavioural responses. Since the motivation for a negative income tax system is largely to achieve such responses (for example, labour supply responses), this feasibility analysis might have been unduly harsh. Research is required to incorporate behavioural responses into the analysis.     

用负所得税原理改革我国低保制度的现实性分析

近年来,我国许多学者都提倡用负所得税原理来改革我国的最低生活保障制度。文章认为,负所得税制度由于在实践上并不成熟、对劳动供给的激励作用不确定、其本身也存在不统一、不稳定等原因,并不像其表面显示的那样有吸引力。而且,从我国的现实情况来看,现阶段也存在着很多的现实阻碍和困难,用负所得税原理改革我国低保制度并不可行。     

外资企业税收优惠的非效率性

本文中所说的“外资企业” ,是指由非本国常住单位的自然人和法人投资的企业 ,包括由它们独资或与本国企业合资或合作经营的企业 ,也就是人们通常所说的“三资企业”。最近 2 0年来 ,这一类外资企业在我国享受到了不少税收优惠 ,这些税收优惠使适用于这些外资企业的企业所得税和流转税的税率都明显低于本国企业 (许善达 ,1 999)。本文使用数学模型进行的理论分析将说明 ,这样的税收优惠是无效率的 ,其净结果是降低了本国居民所享受的福利。为了能够进行严格的数量化分析 ,我们必须把外资企业税收优惠的影响分成两个不同的方面 :总收入效应和…     

Tax bases,tax rates and the elasticity of reported income

Tax reforms usually change both tax rates and tax bases. Using a panel of income tax returns spanning the two major U.S. tax reforms of the 1980s and a number of smaller tax law changes, I find that the elasticity of income reported on personal income tax returns depends on the available deductions. This highlights that this key behavioral elasticity is not an immutable parameter but rather that it can be to some extent controlled by policy makers. One implication is that base broadening reduces the marginal efficiency cost of taxation. The results are very similar for all income categories indicating that the rich are more responsive to tax rates because tax rules that apply to them are different (their tax base is narrower). The point estimates indicate that the Tax Reform Act of 1986 reduced the marginal cost of collecting a dollar of tax revenue, with roughly half of this reduction due to the base broadening and the other half due to the tax rate reduction. As a by-product, the analysis in this paper offers a reconciliation of disparate estimates obtained by previous studies of the tax responsiveness of income.     

MACROECONOMIC AND REDISTRIBUTIONAL EFFECTS OF CONSUMPTION TAXES IN THE USA*

This paper studies the effect of an increase in consumption taxes using a dynamic general equilibrium model of overlapping generations calibrated to the US economy. When the proceeds are used to reduce income taxes, the reform raises the aggregate capital and labour supply in the long run. Workers increase labour supply immediately in response to the reform, while consumption rises only gradually. The tax reform also transfers wealth from old consumers to young consumers. As a result, while future generations experience significant welfare gains, current generations, particularly old consumers, tend to experience sizable welfare losses. When the proceeds are used for a lump‐sum transfer, the aggregate capital and labour both decrease in the long run. This reform is welfare‐improving for the current low‐income households.     

Public Provision of Private Goods,Self‐Selection,and Income Tax Avoidance

Redistributive taxation should benefit those with low earnings capacity rather than those who choose a lower income to obtain tax savings. Several contributions have highlighted how public provision of work complements can discourage people from lowering labor supply to diminish taxable income. We show how tax avoidance, previously neglected, can alter the conclusions regarding public provision. Tax avoidance breaks the link between labor supply and reported income. An agent reducing his reported income to escape taxes might no longer forego a publicly provided labor complement, because he can now lower his income by avoiding more rather than working less.     

Worldwide Tax Reform ‘How Does Australia Compare?’

Drawing principally on the English-speaking countries, where tax reform has proceeded furthest, the common characteristics and causes of the worldwide tax reform movement of the 1980s are examined. Tax reform reflected the change in economic philosophy — disillusionment with state intervention and a revival of belief in the efficacy of markets.
The causes and content of tax reform in Australia have much in common with those elsewhere except that the reduction in marginal rates of income tax was achieved with no real change in the tax mix. The success of tax reform is assessed using as criteria: (i) how far the outcome matched the objectives specified by the reformers themselves — in particular tax neutrality; (ii) the sustain-ability of the reforms; and (iii) how far 'undesirable' consequences (especially distributional effects) were avoided. Applying these criteria to Ireland, Canada, the United Kingdom, the United States, New Zealand and Australia, it is concluded that in all these countries there are deficiencies, but Australia comes second to New Zealand in the success league. The notable Australian deficiencies are the lack of a broad-based consumption tax (Australia is now the only OECD country without one) and the fact that lower marginal rates of income tax have been achieved mainly because of falling real thresholds of the tax brackets.     

我国绿色税收政策效果分析及改革设想

我国在经济快速发展过程中出现了许多社会问题,其中环境污染是最严峻的问题之一。税收政策在促进环境改善方面具有十分明显的作用,通过制定税收政策引导企业经营方式的改变,从而实现环境改善已是各国的通行作法。与欧美国家相比我国税制的绿化程度很低,且不成体系。与生态环境有关的税收政策,散见于资源税、消费税、企业所得税等税种中,许多仍以费的形式存在,有较大的空间。应在借鉴国外绿色税收政策成功作法和经验的基础上,增加现行税种的环境保护功能,实行专门的环保税种,实行费改税等。     

Tax Evasion and the Time Consistency of the Government's Income Tax Policy

It is shown that it is not necessarily optimal for the government to tax capital income at a high rate even when capital is in fixed supply because the supply of capital for tax purposes may be elastic if capital income tax evasion occurs. An example is given where the wage tax rate is positive and greater than the interest income tax rate even though capital is in fixed supply. Conditions are also derived under which the capital income tax rate is lower in the closed-loop policy game, where capital is fixed, than in the open-loop game, where it is not.
JEL Classification Numbers: E61, H26.     

Tax reform in a two-class growth model

This paper analyzes the welfare and distributional effects of tax reforms in a two-class model with exogenous labour supply. It extends the empirically calibrated, standard life-cycle model to include both pure life-cycle savers and households with an altruistic bequest motive. The tax reform simulations cover the move from an income to a wage and a consumption tax, respectively. The role of borrowing constraints is studied and a dynamic analysis of tax reforms using a static expectation approach is performed. The simulation results indicate that the two tax reforms have different impacts on the welfare of the two classes: while the pure life-cycle savers are better off with the consumption tax, the altruistically motivated households gain more under a wage tax. The results further show that while the introduction of a consumption tax is distributionally neutral, the move to a wage tax substantially increases income and wealth inequality.     

Tax Reform,Structural Unemployment and the Environment

The effects of environmental tax reform, i.e., using the proceeds of a higher energy tax rate to lower the labour tax rate, on wage formation, employment and environmental quality are analysed in the context of a small open economy with structural unemployment caused by hiring costs. We find that such a reform may boost employment if it shifts the tax burden away from workers towards those without employment in the formal sector. Environmental tax reform succeeds in shifting the tax burden away from workers in the formal sector if higher energy taxes reduce earnings in the informal sector by reducing labour productivity.     

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.     

Tax harmonization and tax competition in the European Union: Lessons from Switzerland

This paper presents empirical evidence on individual income tax competition in Switzerland. Tax competition has some influence on the spread of people with high income over the cantons, and it is partly capitalised in dwelling rents. However, it neither leads to a collapse of public good supply nor makes redistribution by the fiscal authorities impossible. Thus, if tax competition works well in Switzerland there is no reason why it should have disastrous effects in a future European Union.     

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)     

Tax competition and tax structure in open federal economies: Evidence from OECD countries with implications for the European Union

Tax competition arguments suggest that governments that operate in an open economy (such as local governments) should not and will not rely on non-benefit taxes, such as the income tax. Yet we observe reliance on income taxes by local governments in many countries, and such reliance changes over time. Evidence from a panel data set of 13 OECD countries over the period 1975-1984 suggests that competition between levels of government (resulting in a vertical fiscal externality) and between governments at the same level (resulting in a horizontal fiscal externality) provide some economic rationale for these changes. Moreover, the evidence indicates that the vertical and horizontal fiscal externalities interact. These results have some interesting implications for fiscal policy in the European Union, particularly as the EU continues to evolve. One implication for the EU is that enlargement that increases tax base disparities within the EU (and is not accompanied by an EU-level income tax) will tend to lower national income tax rates, although this must be qualified because it also depends on the mobility of the population. A second implication is that fiscal expansion of the EU to include an EU-level income tax may tend to lower the reliance of national governments on income taxes through the vertical externality, but may also tend to equalize tax bases across countries, and so increase reliance on national income taxes through the horizontal externality.     

控制权性质影响税收敏感性吗?——基于企业劳动力需求的检验

西方学者研究表明企业所得税是劳动力需求的重要影响因素,这一理论在中国是否适用?中国大部分上市公司为国有控股企业,这一特殊的制度背景是否会影响企业所得税与劳动力需求的关系?本文基于2007年企业所得税改革这一外生政策变化,在检验西方企业所得税与劳动力需求关系的理论在中国是否适用的基础上,就不同控制权的性质是否会影响企业劳动力需求的税收敏感性进行了检验。研究发现企业所得税税率降低和"就业税盾"增加提高了企业劳动力需求,但这种税率和"就业税盾"的变化对国有控股企业劳动力需求变化的影响要显著小于非国有控股企业。这表明税收是影响企业劳动力需求的重要因素,但国有控制权使得这种税收敏感性变弱。本文的研究结果不仅丰富了相关领域的国际学术文献,而且对我国就业政策的制定具有政策含义。