Labor-dependent capital income taxation

Capital taxation which is negatively correlated with labor supply is proposed. This paper uses a life-cycle model of heterogeneous agents that face idiosyncratic productivity shocks and shows that the tax scheme provides a strong work incentive when households possess large assets and high productivity later in the life-cycle, when they otherwise would work less. The system also adds to the saving motive of prime-age households and raises aggregate capital. The increased economic activities expand the tax base and the revenue neutral reform results in a lower average tax rate. The negative cross-dependence generates a sizable welfare gain in the long-run relative to the tax system that treats labor and capital income separately as a tax base. The reform, however, can hurt the elderly during the transition with a high marginal tax on their capital income.     

Human capital and optimal positive taxation of capital income

This paper analyzes optimal linear and non-linear taxes on capital and labor incomes in a life-cycle model of human capital investment, financial savings, and labor supply with heterogenous individuals. A dual income tax with a positive marginal tax rate on not only labor income but also capital income is optimal. The positive tax on capital income serves to alleviate the distortions of the labor tax on human capital accumulation. The optimal marginal tax rate on capital income is lower than that on labor income if savings are elastic compared to investment in human capital, substitution between verifiable and non-verifiable inputs in human capital formation is difficult, and most investments in human capital are verifiable so that education subsidies can directly reduce the tax wedge on learning. Numerical calculations suggest that the optimal marginal tax rate on capital income is substantial.     

Uninsurable investment risks and capital income taxation

This paper studies the capital accumulation and welfare implications of reducing capital income taxation in a general equilibrium economy with uninsurable investment risks. It has been shown that, with uninsurable investment risks, under-accumulation of capital may result compared to the complete markets economy. We show that reducing somewhat the capital income tax rate increases the capital stock and leads to a welfare gain. The complete elimination of the capital income tax, however, is not necessarily welfare improving.     

Housing policy and the progressivity of income taxation

Most countries have tax provisions and subsidies to promote homeownership. These provisions generate an asymmetry in the tax treatment of owner- and rental-occupied housing, which affects the incentives to supply tenant-occupied housing. This paper analyzes the quantitative importance of the interaction of these provisions with the progressivity of income taxation in the context of an overlapping generations model with housing and rental markets. The model replicates the key facts observed in the economy, as well as distributional patterns of ownership, house size, and landlord behavior. The model suggests that the progressivity of income taxation can amplify or mitigate the effects of the asymmetries with important implications for housing tenure, housing consumption, portfolio reallocations, and welfare that differ from those reported in the literature.     

Personal taxation of capital income and the financial leverage of firms

Tax competition for capital has led to a trend where many countries levy lower taxes on interest income, often introducing differential taxation between interest and business income. This study analyzes the effect on firm debt usage. We exploit Germany’s 2009 tax reform, which introduced a final withholding tax on interest income with a flat rate 18 percentage points below the unchanged tax rate on income from unincorporated businesses, as a quasi-experiment. The results, based on firm-level panel data, indicate that firms increase their leverage when the tax rate on interest income decreases, albeit to a small degree.     

On taxing capital income with income shifting

We examine a linear capital income tax and a nonlinear labor income tax in a two-type model where individuals live for two periods. We assume that taxes are paid only in the second period in which the agents receive both labor and capital income and may shift income from labor to capital. The two types of individuals may differ with respect to wage rate and initial resource endowments. In the absence of income shifting, endowment variation motivates a capital income tax which would not exist where there is pure wage rate variation. In the latter circumstance, income shifting would indeed establish a case for a capital income tax while adding variation in resource endowments would ambiguously affect the case. The asymmetric information case for a capital income tax must be traded off against distortionary effects not only on savings, but also on labor as an agent may earn labor income which is reported and taxed as capital income.      

Optimal income taxation and migration

We tackle the issue of optimal dynamic taxation of capital income in an economy with disconnection as in Weil (J Public Econ 38:183–198, 1989), generated by migration and intra-family altruism. We show that, when the government aims at correcting such a disconnection using time-varying weights in the social welfare function, then there is room for nonzero capital income taxation, both in the short and in the long run.     

Institutional quality and capital taxation

We describe the preferred taxation regime in a small economy with uncertain institutional quality. We obtain that a preferential taxation regime in which taxes can be matched to the mobility of the tax base may be worse off than a non-preferential taxation regime in which taxes are constant across bases with distinct mobility. Since the small economy takes foreign taxes as given, our result is not driven by a downward pressure on revenues caused by unconstrained tax competition. It is instead related to the ability of a non-preferential taxation regime to credibly convey information about the institutional quality of the small economy. We present some empirical evidence which corroborates our results.     

Disability insurance and optimal income taxation

This paper studies the design of disability insurance scheme when agents differ in their privately known productivity. We extend the Diamond and Mirrlees (1978) two period model to allow for agents differing ex-ante in their productivity and characterize the optimal nonlinear tax transfer that maximizes a utilitarian welfare function when per-period earnings and age are observable while individuals’ productivity and health status are not observable. We show that the induced tax/benefit scheme should exhibit a marginal income tax that decreases with age for some agents. A marginal subsidy on the young high productive income may be desirable. While the disability scheme always involves the old low productive agents to be indifferent between working and claiming disability benefits, this result is not always true for the old high productive agents. JEL Classification H55 · H23 · E62     

Intangible investment and Ramsey capital taxation

The standard analysis of optimal fiscal policy aggregates different types of assets into a unique capital good and all types of capital taxes into a unique capital tax. This paper considers a disaggregated framework: an economy with corporate and dividend taxes, where firms invest in both tangible and intangible assets (which can be expensed or sweat). In our setup, firms can always respond to changes in the timing of taxation. We find that the optimal long-run policy features zero corporate taxes and positive dividend taxes, with labor and dividend taxes being identical. Moreover, the initial capital levy is relatively small.     

A dynamic model of entrepreneurship with borrowing constraints: theory and evidence

Does wealth beget wealth and entrepreneurship, or is entrepreneurship mainly determined by an individual’s ability? A large literature studies the relationship between wealth and entry to entrepreneurship to inform this question. This paper shows that in a dynamic model, the existence of financial constraints to the creation of businesses implies a non-monotonic relationship between wealth and entry into entrepreneurship: the probability of becoming an entrepreneur as a function of wealth is increasing for low wealth levels—as predicted by standard static models—but it is decreasing for higher wealth levels. U.S. data are used to study the qualitative and quantitative predictions of the dynamic model. The welfare costs of borrowing constraints are found to be significant, around 6% of lifetime consumption, and are mainly due to undercapitalized entrepreneurs (intensive margin), rather than to able people not starting businesses (extensive margin).     

Second-best tax policy and natural resource management in growing economies

This paper investigates the exploitation of natural resources in a growing economy within a second-best fiscal policy framework. Agents derive utility from two types of consumption goods—one which relies on a natural resource input and one which does not—as well as from leisure and from natural resource amenity values. We connect second best policy to essential components of utility by considering the elasticity of substitution among each of the four utility arguments. The results illustrate potentially important relationships between amenity values and leisure. When amenity values are complementary with leisure, for instance when natural resources are used for recreation, optimal taxes on goods produced with natural resources generally increase over time. On the other hand, optimal taxes on goods produced from natural resources generally decrease over time when leisure and amenity values are substitutes. Under some parameterizations, complex dynamics leading to non-monotonic time paths can emerge.     

Trade credit,collateral liquidation,and borrowing constraints

Assuming that firms’ suppliers are better able to extract value from the liquidation of assets in default and have an information advantage over other creditors, the paper derives six predictions on the use of trade credit. (1) Financially unconstrained firms (with unused bank credit lines) take trade credit to exploit the supplier's liquidation advantage. (2) If inputs purchased on account are sufficiently liquid, the reliance on trade credit does not depend on credit rationing. (3) Firms buying goods make more purchases on account than those buying services, while suppliers of services offer more trade credit than those of standardized goods. (4) Suppliers lend inputs to their customers but not cash. (5) Greater reliance on trade credit is associated with more intensive use of tangible inputs. (6) Better creditor protection decreases both the use of trade credit and input tangibility.     

2010年税策走势与影响

在出席“第六届中国CFO高峰论坛”时,中国社会科学院财贸研究所副所长高培勇博士发表了主题演汫,并对2010年税收政策安排做了梳理和展望。     

Risk taking and taxation in complete capital markets

In general equilibrium, with complete conventional securities markets and endogenous asset supply, taxes on risk remuneration are ineffective but harmless. They do not alter the real allocation of goods or the distribution of wealth, they impose no excess burden, and, in particular, have no impact on risk taking.     

Optimal capital structure under corporate and personal taxation

In this paper, a model of corporate leverage choice is formulated in which corporate and differential personal taxes exist and supply side adjustments by firms enter into the determination of equilibrium relative prices of debt and equity. The presence of corporate tax shield substitutes for debt such as accounting depreciation, depletion allowances, and investment tax credits is shown to imply a market equilibrium in which each firm has a unique interior optimum leverage decision (with or without leverage-related costs). The optimal leverage model yields a number of interesting predictions regarding cross-sectional and time-series properties of firms' capital structures. Extant evidence bearing on these predictions is examined.     

Destination- and origin-based taxation under international capital mobility

This paper analyzes the macroeconomic effects of origin-based and destination-based taxes in a small open economy with international capital mobility and overlapping generations. In contrast to origin-based production taxes, destination-and origin-based consumption taxes do not distort the international allocation of capital. Nevertheless, the origin and destination principles are typically not equivalent due to different impacts on the intergenerational and international distribution of resources.     

Tax competition and fiscal equalization under corporate income taxation

This paper challenges the view that tax base equalization by the so-called representative tax system (RTS) removes inefficient undertaxation in corporate tax competition. The innovation of the paper is that it focuses on a tax on corporate income, instead of the unit tax on capital considered in previous studies. We employ a tax competition model with fiscal equalization and show that the RTS fails to fully internalize pecuniary and fiscal externalities. As a consequence, the RTS yields inefficiently low tax rates in the Nash equilibrium of the tax competition game between governments. Tax revenue equalization performs even worse, but combined with equalization of private income it implements the efficient tax rates on corporate income.