Tax reform

Tax reform

Explaining Tax Reform

Economic analysts generally have a more dispassionate attitude toward the subject. They are interested primarily in studying the effects of taxation on individual behavior and market prices, and in describing the distributional effects of tax policies. When the discussion turns to changes in the tax system, however, positive analysis may be replaced by advocacy of particular alternatives. This is illustrated by the frequent use of the word "reform" in the literature, a term usually employed to refer to changes designed to make the system better, where "better" is judged in relation to some ideal standard.Working Paper Number 04-48

The Dynamic Process of Tax Reform

The tax reform literature, pioneered by Guesnerie [1977], uses static models but views tax reform as a dynamic process, i.e., as a policy-maker implementing incremental reforms over time. This paper studies tax reform in a dynamic version of the Diamond-Mirrlees-Guesnerie model and focuses on a specific aspect of the dynamic process, namely, the implications for tax reform of agents leaving bequests. The main idea is that a tax reform in one period will affect bequests and therefore endowments, equilibrium, and welfare in subsequent periods. Thus, the process of tax reform cannot be analyzed as a sequence of static economies; instead, the economies are linked by bequests. The paper undertakes a tax reform analysis a la Guesnerie, but with an added focus on welfare improving reforms for each generation. Second-best Pareto optima are then characterized, and these conditions are compared to the static optimal tax formulae derived in the literature. In particular, the key Diamond-Mirrlees result that production efficiency is desirable at second-best optima no longer holds in the presence of (effective) restrictions on the taxation of private savings. Restrictions on government savings (including balanced budget restrictions), however, do not disturb the desirability of production efficiency. Finally, the effects of certain political constraints on the tax reform process are also considerDynamic tax reform, second-best Pareto optima, capital taxation

Earlier or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the question as to whether or not the later stages of the German Income Tax Reform should be brought forward. The present paper assesses the welfare and macroeconomic consequences of the German Income Tax Reform in the scope of a simplified DGE model of the Auerbach-Kotlikoff type and deals explicitly with the issue of bringing forward an already announced tax reform. As well as evaluating the considered fiscal policy options in terms of their (social) welfare implications we also touch on the political economy aspects of implementing a tax reform.German Tax Reform, early tax reform, overlapping generations, DGE model

Earlier Or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the question, whether or not the later stages of the German Income Tax Reform should be brought forward. The present paper assesses the welfare and macroeconomic consequences of the German Income Tax Reform in the scope of a simplified DGE model of the Auerbach-Kotlikoff type and deals explicitly with the issue of bringing forward an already announced tax reform. Besides evaluating the considered fiscal policy options in terms of their (social) welfare implications we touch on the political economy aspects of implementing a tax reform.German Tax Reform, early tax reform, overlapping generations, DGE model

Consumption Tax Options for California

Reviews concerns about the state's current tax system and evaluates potential consumption-based tax reforms, including retail sales tax reform, corporate income tax reform, gross receipts tax, value added tax, and sales-apportioned tax on value added

DEGREE OF TAX BUOYANCY IN INDIA : AN EMPIRICAL STUDY

An attempt is made in the present to provide an empirical content to differential coefficient of tax [revenue] buoyancy during post tax reform period in India by fitting a double-log regression model with an interaction variable to the stationary time series data based on Augmented - Dicky Fuller [ ADF ] and Phillips-Parron [PP] Tests . The period after 1992 is considered as post tax reform period to look at the prognostications of tax reforms that had been initiated by the government of India. The regression results illustrate that the estimate of constant gross tax buoyancy is positively significant and more than unity during pre tax reform period illuminating that gross tax is moderately elastic. From this upshot it can be comprehended that a one percent increase in income leads to increase the gross tax revenue by more than one percent, all else equal. Further it can be understood that the average propensity to tax [ratio of Gross Tax Revenue to Gross Domestic Product ] was increasing with the increase in Gross Domestic Product during pre tax reform period. The regression coefficient of interaction variable is significantly negative and stumpy showing a downward shift in the degree of tax buoyancy during post tax reform period. The estimate of the tax buoyancy, which was just above the unity during pre tax reform period, is less than unity during post tax reform period evincing the fact that the gross Tax is relatively inelastic. From this it can also be understood that the average propensity to tax is declining with the increase in Gross Domestic Product during post tax reform period. Thus the estimates of gross tax buoyancy during pre and post tax reform periods are not stable.

A "Double Dividend", After All?

The consensus view among economists seems to be that a green tax reform is unlikely to be associated with a "double dividend" (Bovenberg 1998). However, the results derived in the present paper suggest that this view needs to be qualified. We demonstrate that a green tax reform is likely to be associated with a significant "double dividend" if the government prior to taking the environmental aspect into account has adopted a proportional tax structure due to the administrative costs involved in differentiating commodity tax rates, and if the green tax reform stimulates the labour supply and has desirable income distributional effects.Optimal taxation, externalities, administrative costs, green tax reform, double dividend

Transport tax reform, commuting and endogenous values of time

Previous studies of transport tax reform have typically assumed that the reform itself does not affect the marginal value of time. In this paper we consider a model of urban transport with two trip purposes, commuting and non-commuting, to analyse the effects of transport tax reform on the value of time and marginal external congestion costs. The theoretical results suggest that the assumption of multiple trip purposes implies that these effects are non-trivial. Consequently, assuming exogenous time values may lead to inaccurate estimates of optimal congestion taxes and of the welfare effects of transport tax reform. Empirical work using Belgian data illustrates the potentially large effect of transport tax reform on time values. In fact, the majority of the tax reform exercises studied reduce traffic levels but raise time values and marginal external congestion costs.tax reform; congestion; value of time

Intertemporal Labor Supply Effects of Tax Reforms

In the year 2000, the German government passed the most ambitious tax reform in post-war German history aiming at a significant tax relief for households. One central aim of this tax reform was to improve work incentives and, thereby, foster employment. In this paper, I estimate an intertemporal discrete choice model of female labor supply that allows to analyze the behavioral effects of the tax reform on the labor supply of married and cohabiting women over time. Using the Markov chain property, I analyze the dynamics of labor supply behavior and derive the short- and long-run labor supply effects of the tax reform.Intertemporal labor supply of married women, tax reform, Panel data, microsimulation