Does higher tax morale imply higher optimal labor income tax rate?

We analyze the impact of tax morale on optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale. Limiting the utilitarianism to the poorer parts of the population (defined by the inclusion share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the inclusion share, provided that the average wage of those included is higher than 0.54 times the average wage

Hungarian Pension System: The Permanet Reform

On January 1, 1998 a three-pillar pension system was introduced in Hungary. It is replacing about 1/4 of the existing unfunded public system by a funded private system. The transition to this mixed system was obligatory for those entering the labor market after June 30, 1998 and optional for the current labor force. Meanwhile the public pillar is also being reformed. The current (1998-2002) government has made important changes to the on-going reform program started by its predecessor: The benefits under the mixed system will be less attractive than envisaged, the participation in the mixed system is not mandatory for the entrants to the labor force since the beginning of 2002 and the public pillar is to be based on the virtual individual accounts (NDC). There is a danger that the permanent changes will further weaken the trust in the mandatory (public and private) pension system.

Social Security Reform in the US: Lessons from Hungary

The partial privatization of the US Social Security system was clearly the top economic policy priority for the new Bush administration. While many famous economists, publicists and politicians support, others reject the partial privatization of the Social Security system. The international comparisons have been quite infrequent, concentrated on few countries (Chile, Great Britain and Sweden) and left out similar reforms introduced in similar situations, like in Hungary, Poland and other ex-communist countries. In this article I try to make up for this omission and outline the lessons from the Hungarian reform, started in 1998. The conclusion is simple: such a reform is possible but does not solve the problems of social security.Social Security, Pensions, Prefunding of pensions, United States, Hungary

Optimal child allowances with heterogeneous fertilities

A child-allowance system is to raise fertility beyond t he individual optimum. The more heterogeneous the population with respect to rearing costs, however, the stronger are the redistribution and polarization

Optimal child-related transfers and personal income tax with endogenous fertility

To compare the systems of chil d benefits and of family tax deductions, we create a model with endogenous fertility and basic income, also financed from proportional wage taxes. Pensioners are neglected but younger and older workers are distinguished: the former raise children and recei ve child benefits, while the latter not. Through the balance equation, current average fertili ty depends on past average fertility. To have a socia lly optimal positive child bene fi t, past average fertility has to be less than 1. The deduction's effi ciency is presumably lower than the bene fi t's and may even be lower than that of pure basic income