The impact of the Indonesian income tax reform: A CGE analysis

This study evaluates the impacts of Indonesia's recent income tax reforms on key macroeconomic variables, as well as the impacts on poverty and income distribution. It was found that the reductions in personal income tax and corporate income tax increase economic growth under a balanced budget assumption. The policy reforms also lead to a small reduction in the incidence of poverty. However, the policies also lead to an increase in income inequality because the tax cut is more beneficial to households in the highest income categories. It is recommended that future tax cuts should target the urban and rural poor.     

Optimal Piecewise Linear Income Taxation

Given its significance in practice, piecewise linear taxation has received relatively little attention in the literature. This paper offers a simple and transparent analysis of its main characteristics. We fully characterize optimal tax parameters for the cases in which budget sets are convex and nonconvex respectively. A numerical analysis of a discrete version of the model shows the circumstances under which each of these cases will hold as a global optimum. We find that, given plausible parameter values and wage distributions, the globally optimal tax system is convex, and marginal rate progressivity increases with rising inequality.     

Optimal democratic mechanisms for taxation and public good provision

We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.     

Fraudulent collection of unemployment benefits : A theoretical analysis with reference to income tax evasion

The harshest abusers of the unemployment insurance program are those employed who collect benefits while working. This paper analyzes fraudulent claiming behavior and optimal deterrence policy under two alternative penalty schemes, commonly used in tax evasion analyses: one relates punishment to the magnitude of the dishonesty, whereas the other relates punishment to the amount of illegal returns. Two exclusive features of fraudulent benefit claiming are given special attention: the requirement to report at a labor exchange to demonstrate availability for work, and the need to serve a waiting period before benefits can be collected.     

The effects of alternative fiscal policies on the intertemporal government budget constraint

This article presents the effects of alternative fiscal policies on the intertemporal government budget constraint when the time horizon of the policy maker varies. I show that the wealth effect associated with cuts in the skill-adjusted labor income tax rate improves the intertemporal budget balance, whereas the intertemporal substitution effect associated with the physical capital income tax rate deteriorates the intertemporal budget. Under plausible parameter values, the tax rate on skill-adjusted labor income cannot by itself balance the intertemporal budget at all horizons.     

Subsidy design: wealth versus benefits

A government would like to subsidize an indivisible good. Consumers’ valuations of the good vary according to their wealth and benefits from the good. A subsidy scheme may be based on consumers’ wealth or benefit information. We translate a wealth-based policy to a benefit-based policy, and vice versa, and give a necessary and sufficient condition for the pair of policies to implement the same assignment: consumers choose to purchase the good under the wealth-based policy if and only if they choose to do so under the translated benefit-based policy. General taxation allows equivalent policies to require the same budget.     

Reexamination of Economic Growth, Tax Policy, and Distributive Politics

The paper examines the relationship between economic growth, tax policy, and distribution of capital and labor ownership in a one‐sector political‐economy model of endogenous growth with productive government spending financed by a proportional tax on capital income. The analysis shows that inequality in wealth and income can be positively or negatively related to the optimal tax rate. In either environment, higher inequality leads to a lower after‐tax return to capital, thereby reducing the economy's growth rate.     

Choice and design of regulatory instruments in the presence of green consumers

Using a vertically differentiated product model, this paper examines welfare implications of various government policies in a situation where consumers are environmentally discerning. It studies ad valorem taxes/subsidies and emission taxes. The optimal policy depends on the magnitude of damage parameter associated with environmental externality. For a given distribution of tastes and preferences, as the damage parameter increases from a low to a high value, the optimal policy shifts from an ad valorem tax to an ad valorem subsidy. It also shows that for a sufficiently low damage parameter, an ad valorem tax dominates an emission tax.     

Intertemporal budget policies in an endogenous growth model with nominal assets

Intertemporal budget policies are assessed in an endogenous growth model with nominal assets. The paper provides relative rankings of policies and policy instruments in terms of the tax liabilities of the private sector necessary to guarantee intertemporal government budget solvency and in terms of the welfare of the representative agent. The role of nominal assets is shown to be of relative importance.     

US federal redistributive income policies

The purpose of this paper is to present a statiscial model of inequality that allows us to analyse simultaneously the impact of several major redistributive expenditure policies, as well as analysing the impact of income taxation on inequality. The paper includes multivariate exogeeity tests to determine whether the policies have ‘caused’ the observed income distribution or if there is feedback, i.e. inequality in the distribution has lead to enhanced (or diminished) redistributive policies. The direction of causality for these policies has not, to ourr knowledge, been previously examined. This paper examines the usual redistributive vehicles of transfer payments, Social Security, Medicare and Medicaid, as well as analysing the impact of the personal income tax system on inequality. Using time series analysis we can allow for lagged effects of these policies as well as current period effects. This lagged effects specification may be sugggestive of behavioural responses to policy changes.     

Government debt and optimal monetary and fiscal policy

How do different levels of government debt affect the optimal conduct of monetary and fiscal policies? And what do these optimal policies imply for the evolution of government debt over time? To provide an answer, this paper studies a standard monetary policy model with nominal rigidities and monopolistic competition and adds to it a fiscal authority that issues nominal non-state contingent debt, levies distortionary labor income taxes and determines the level of public goods provision. Higher government debt levels make it optimal to reduce public spending, so as to dampen the adverse incentive effects of distortionary taxes, but also strongly influence the optimal stabilization response following technology shocks. In particular, higher debt levels give rise to larger risks to the fiscal budget and to tax rates. This makes it optimal to reduce government debt over time. The optimal speed of debt reduction is missed when using first-order approximations to optimal policies, but is shown to be quantitatively significant in a second-order approximation, especially when technology movements are largely unpredictable in nature.     

On the interaction between education and social security

This paper uses an overlapping generations model with endogenous fertility choices to analyze the quantitative costs and benefits of subsidizing higher education, paying particular attention to the interaction between such policy and the sustainability of the social security system. The paper focuses on the demographic change as the mechanism that link both policies. It is found that an increase in education subsidies changes the educational composition of the population and lowers average fertility. Lower average fertility and higher life expectancy of educated individuals translates into changes in the age structure of the population that requires an increase in the social security tax rate in order to balance the pension budget. Such process reduces the welfare benefits of this educational policy since the rise in social security taxes lowers the after-tax lifetime earnings of almost all individuals born in the period of the policy reform and over.     

Choosing the right instrument

This paper analyses the optimal choice of second-best optimal environmental policies. Using a partial equilibrium model, the paper first reconfirms the well-known result that the existence of a double dividend (in its weak definition) favours environmental policy instruments which maximise tax revenues for a given improvement in environmental quality. Additional revenues can be used to reduce the distortion of existing taxes such as taxes on labour and capital income. Without uncertainty, environmental taxes and auctioned permits are equally appropriate. In the presence of uncertainty, however, the optimal choice of taxes or tradable permits depends on the relative magnitudes of the marginal environmental damage and the marginal benefit from consuming a polluting good. In the second part, the paper, therefore, analyses how the revenue capacity affects the optimal choice of environmental policy instruments in the presence of uncertainty. The paper shows that the first-best choice rule between price and quantity regulation (Weitzman, 1974) remains valid in a second-best world with distortionary taxation.     

健康性别不平等与政府卫生预算的社会性别分析

从社会性别的角度分析了我国不同性别之间的健康需求、预算配置和服务受益情况。(1)我国女性人口卫生服务需求高于男性,且经济欠发达地区女性卫生服务利用受到一定程度抑制;(2)性别问题并非当前预算体制下卫生预算分配的主要关注点,但目前已有促进两性平等利用卫生服务的实际行动和措施;(3)在当前公共卫生投入政策下,两性公共卫生服务受益差异不明显。(4)现有统计信息系统大多不归集分性别资料,尤其是预算数据,因此尚无法对政府卫生预算开展深入的性别分析。要推进性别预算观念和分性别统计工作,逐步建立和完善我国的性别预算框架和操作规范,将社会性别纳入健康政策主流,使健康政策和政府卫生预算增加社会性别公平。     

Redistribution and entrepreneurship with Schumpeterian growth

We examine the effects of redistributive taxation on growth and inequality in a Schumpeterian model with risk-averse agents. There are skilled and unskilled workers, and the growth rate is determined by the occupational choice of skilled agents between entrepreneurship and employment. We show that redistribution provides insurance to entrepreneurs and increases the growth rate. The effects on inequality are such that low tax rates increase inequality relative to laissez-faire due to changes in wages, but higher tax rates can simultaneously raise growth and reduce inequality. We contrast the optimal linear income tax with alternative policies for promoting R&D and find that it is preferable on both equity and efficiency grounds.      

Modernization of Tax Administrations and Optimal Fiscal Policies

Since Sandmo (1981) , many articles have analyzed optimal fiscal policies in economies with tax evasion. All share a feature: they assume that the cost of enforcing the tax law is exogenous. However, governments often invest resources to reduce these enforcement costs. In a very simple model, we incorporate such investments in the analysis of an optimal fiscal policy. We characterize their optimal level and we show numerically how they interact with the other dimensions of the optimal fiscal policy. Finally, we highlight the differences between our results and those obtained in a model without investment in the tax administration.     

基于高收入群体的税收政策反思

中国的某些税收政策没有起到调节收入分配、缩小收入差距的作用,对形成高收入群体的收入来源和财产,往往采取轻税政策,广大低收入者由于在收入、财产等方面的匮乏使其无法享受到税收优惠的好处。中国应改变目前的税收政策取向,加大对高收入群体的征税力度,发挥税收政策调节功能,实现收入分配公平。     

Socially optimal procurement with tight budgets and rationing

We investigate the behaviour of a social planner that secures the supply of a good, e.g. an environmental benefit, through contracting with private agents. While the social planner seeks to maximise net social benefits, she is also controlled with a fixed budget. Private agents are profit maximising and hold private information concerning their variable costs of production. They also have known fixed costs of contracting. We find that budget constraints and fixed costs change the optimal contract design in more than one way: the social planner minimises costs, rations high-cost contracts to reduce fixed costs and information rents, and distorts contracts for all agent types, including low-cost agents. We find that rationing improves social welfare. Also, even though social costs – including tax distortion – are explicitly taken into consideration, they do not affect the design of optimal contracts when budgets are tight. In those cases the budget constraint dominates the solution.     

Emission Taxes and Optimal Refunding Schemes with Endogenous Market Structure

The purpose of this paper is to investigate optimal schemes for refunding the emission tax in a free-entry market where the production process generates emissions. We consider the regulation by a three-part tax policy: the government sets an emission tax, a refunding scheme, and an entry-license tax. In contrast to the case of the two-part tax-refund policy under no entry, we show that even if it is impossible to obtain subsidies from outside, the first-best outcome is always attained. Further, the government’s budget constraint is binding under the optimal schemes. Our result implies that the tax-refund system works effectively in a market with endogenous entry.     

Irreversibilities and the timing of environmental policy

The standard framework in which economists evaluate environmental policies is cost–benefit analysis, so policy debates usually focus on the expected flows of costs and benefits, or on the choice of discount rate. But this can be misleading when there is uncertainty over future outcomes, when there are irreversibilities, and when policy adoption can be delayed. This paper shows how two kinds of uncertainty — over the future costs and benefits of reduced environmental degradation, and over the evolution of an ecosystem — interact with two kinds of irreversibilities — sunk costs associated with an environmental regulation, and sunk benefits of avoided environmental degradation — to affect optimal policy timing and design.