The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1988 Tax Flattening in Canada

Federal tax reform in 1988 flattened the Canadian personal income tax schedule, changing the marginal tax rates for many individuals. Using methods similar to those applied by Auten and Carroll (1999) in the study of the effects of the 1986 U.S. Tax Reform Act, we estimate the responsiveness of income to changes in taxes to be substantially smaller in Canada. However we find evidence of a much higher response in self-employment income, in the labour income of seniors and from those with high incomes.Marginal tax rate effects on taxable income; tax avoidance

The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1988 Tax Flattening in Canada

Federal tax reform in 1988 flattened the Canadian personal income tax schedule, changing the marginal tax rates for many individuals. Using methods similar to those applied by Auten and Carroll (1999) in the study of the effects of the 1986 U.S. Tax Reform Act, we estimate the responsiveness of income to changes in taxes to be substantially smaller in Canada. However we find evidence of a much higher response in self-employment income, in the labour income of seniors and from those with high incomes.marginal tax rate effects on taxable income; tax avoidance

Tax evasion, information reporting, and the regressive bias hypothesis

A robust prediction from the tax evasion literature is that optimal auditing induces a regressive bias in e¤ective tax rates compared to statutory rates. If correct, this will have important distributional consequences. Nevertheless, the regressive bias hypothesis has never been tested empirically. Using a unique data set, we provide evidence in favor of the regressive bias prediction but only when controlling for the tax agency�s use of third-party information in predicting true incomes. In aggregate data, the regressive bias vanishes because of the systematic use of third-party information. These results are obtained both in simple reduced-form regressions and in a data-calibrated state-of-the-art model

Tax Policy, Asset Prices, and Growth: A General Equilibrium Analysis

This paper presents a multisector general equilibrium model that is capable of providing integrated assessments of the economy's short- and long- run responses to tax policy changes. The model contains an explicit treatment of firm's investment decisions according to which producers exhibit forward- looking behavior and take account of adjustment costs inherent in the installation of new capital. This permits an examination of both short-run effects of tax policy on industry profits and asset prices as well as 1ong-term effects on capital accumulation. The model contains considerable detail on U.S. industry, corporate financial policies, and the U.S. tax system. Simulation results reveal that the effects of tax policy differ significantly depending on whether the policy is oriented toward new or old capital measures like the investment tax credit stimulate investment without conferring significant windfall gains on corporate shareholders. Corporate tax rate reductions with the same revenue cost, on the other hand, yield large windfalls to shareholders while providing only a modest stimulus to investment in plant and equipment.

Making Work Pay for the Elderly Unemployed: Evaluating Alternative Policy Reforms for Germany

We evaluate three policy reforms targeted at older unemployed people: (i) an hourly wage subsidy, (ii) an in-work credit, and (iii) a subsidy of social security contributions on low wages. The work incentive, labour supply and welfare effects of these hypothetical reforms are analysed on the basis of a detailed micro-simulation model for Germany which includes a structural household labour supply model. We find that the simulated labour supply effects of the three policy reforms would be rather similar and of moderate size, ranging between 20,000 and 30,000 older women and between 10,000 and 20,000 older men. Our results also suggest that the hourly wage subsidy yields the highest welfare gains.in-work support, wage subsidies, unemployment, elderly workers

The Price of Doing Good: Executive Compensation in Nonprofit Organizations

This article examines whether nonprofit executive pay patterns are consistent with the espoused social mission of these organizations. We find that nonprofit CEOs are paid a significant fixed component, and many CEOs also receive additional pay associated with managing larger sized organizations. Our analysis indicates that nonprofit executive compensation is not significantly related to CEO performance, as measured either by improved fund-raising results or better administrative efficiency. This weak pay-for-performance link may be due in part to nonprofits concern about violating the non-distribution constraint in the sector, which prohibits the distribution of excess earnings. While nonprofits may not be breaching the letter of the law, some organizations appear to challenging its spirit: We present evidence that CEO compensation is significantly higher in organizations where free cash flows is present, as measured by commercial revenues, liquid assets and investment portfolios.This publication is Hauser Center Working Paper No. 8. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988

The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non-refundable tax credit. This reduced the "jointness" of the tax system: after the reform, secondary earners' effective "first dollar" marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective "first dollar" marginal tax rates faced by women with high income husbands were particularly reduced. Using difference-in-difference estimators, we find a significant increase in labour force participation among women married to higher income husbands.Labour supply, Canadian tax reform, Married women, Difference-in-difference

Income Tax Incentives to Promote Saving

We examine six alternative plans which might be discussed in an effort to increase consumer savings through the personal income tax system in the United States. These plans attempt to affect savings through an increase in the real rate of return either by direct tax cuts on savings or by indexing tax rates against inflation. The paper presents estimates of static and dynamic resource allocation effects for the six plans, and compares them to results obtained in earlier work on the impacts of more sweeping reforms. A medium-scale numerical general equilibrium model is used which integrates the U. S. tax system with consumer demand behavior by household and producer behavior by industry.

Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988

The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non-refundable tax credit. This reduced the "jointness" of the tax system: after the reform, secondary earners' effective "first dollar" marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective "first dollar" marginal tax rates faced by women with high income husbands were particularly reduced. Using difference-in-difference estimators, we find a significant increase in labour force participation among women married to higher income husbands.Labour supply, Canadian tax reform, Married women, Difference-in-difference

The Effect on Program Participation of Replacing Current Low-Income Housing Programs with an Entitlement Housing Voucher Program

This paper estimates the effect on participation rates of families of various types of replacing HUD’s largest low-income housing programs with alternative tenure-neutral entitlement housing voucher programs that differ in their taxpayer cost and the relative generosity of the subsidy to households of different types. The estimates of participation in the entitlement programs are based primarily on the five-percent household sample from the 2000 Decennial Census and participation experience in the only entitlement housing assistance programs that have been operated in the United States. HUD’s administrative records provide data on current recipients of low-income housing assistance. The paper explores the sensitivity of the results to the equations used to predict participation. The results indicate that even the entitlement housing voucher program that costs 10 percent less than the current system would serve 50 percent more households in total and many more of each type – white, black, and Hispanic; elderly and nonelderly; families living in metropolitan and nonmetropolitan areas; small, medium, and large families; and households in the first two real income deciles.Low-income housing assistance, housing vouchers, welfare reform two-sided markets, junk mail, email, telemarketing, Do Not Call List, message pricing, the Medium is the Message, market research. Classification-H53, I38, R00