The Welfare Effects of a Capital Income Tax in an Open Economy

International capital mobility has typically been ignored in discussions of the welfare effects of the capital income tax. In the a typical analysis which does consider the open economy it is recognized that highly-elastic capital flows could significantly alter the usual conclusions. While there have been strenuous debates about the elasticity of international capital flows, there can be little disagreement that international ownership of capital is an important and growing phenomenon. In this paper, we explore the welfare effects of changes in the capital income tax from a different perspective: that of a country in which foreign ownership of a portion of the capital stock and foreign owners' payment of taxesis a reality. With this modification in emphasis, a simple graphical analysis is sufficient to indicate that international capital ownership could easily dominate other welfare effects of tax changes. At least, the arguments presented in this paper raise a caution about ignoring the openness of the economy simply because elasticities are believed small.

On the Optimal Taxation of Capital Income in the Open Economy

The optimal taxation of foreign and domestic investors' incomes is examined with a simple overlapping-generations model. Even when tax rates are allowed to discriminate between these groups,the optimal tax rates on both domestic and foreign investors' incomes in the small open economy are identical and equal to the optimal rate of tax in the closed economy. In light of the emphasis in the literature on the extent to which the elasticity of international flows might lower optimal capital income taxes, this conclusion is quite a surprise. In the large open economy, the optimal tax rate on foreign investors'income alone is a weighted average of one and the small economy tax rate. The optimal tax rate on domestic income is, again, unaffected by the openness ofthe economy. When a uniform tax rate must be set in the large open economy, it is generally higher than the optimal tax rate for a closed economy, a conclusion contrary to the conventional wisdom. However, a higher elasticity of international capital flows is associated with a lower tax rate, as expected, butthe rate remains above the closed-economy rate. In summary, openness matters for optimal tax policy, primarily in the case of the large economy. The reason is mainly the ability to burden foreign investors with a tax liability.

Domestic Tax Policy and Foreign Investment: Some Evidence

Investment abroad has come to play a major role in the total investment undertaken by U.S. firms. Despite this development, very little attention has been paid to the impacts of domestic tax policy on foreign investment. One reason has been the presumption that, since changes in domestic tax rules ordinarily also apply to foreign-source income, policy changes should affect foreign and domestic investment similarly. However, the fact that the tax on foreign-source income is deferred until the income is repatriated represents a crucial difference in the treatment of foreign and domestic income. So long as the U.S. tax is deferred, the effective U.S. tax rate on foreign-source income can be shown to be irrelevant to a firm's optimal foreign reinvestment decision. Foreign investment is now largely accomplished by firms reinvesting earnings abroad, so the reinvestment decision is of primary importance. Thus, a decrease in the effective U.S. tax rate which applies to both domestic and foreign investment income can be thought of as a cut in the tax on domestic investment income, which is encouraging to domestic investment (perhaps at the expense of foreign investment), combined with a cut in the tax on foreign investment income, which has no effect on the optimal foreign reinvestment decision. Consequently, the impacts on foreign and domestic investment of an apparently neutral policy could be very different . Another reason that the response of foreign investment has been neglected in domestic policy discussions is the lack of evidence on the magnitude of that response. This paper utilizes the theory just described to confirm that foreign investment is influenced negatively and quite strongly by the after-tax rate of return to domestic investment. A further test, in which a "gross domestic rate of return" term and a "domestic tax" term are included separately, produces coefficients virtually equal in absolute value, confirming that the net domestic rate of return is the appropriate variable. The results indicate that a tax incentive which has been found to raise net domestic investment by a dollar reduces net foreign investment by at least twenty cents. This conclusion is further reinforced by results from a forward-looking (Tobin's q) mod el. While these results do not point to the primary outcome of a domestic policy change being a domestic-foreign reallocation of the capital stock, they indicate that a significant reallocation does take place. With open economy tax analysis still in its infancy, the question of how this evidence alters the usual conclusions is largely an open one.

Restriction of International Production: The Effects on the Domestic Economy

This paper examines the argument that restricting domestic firms' production abroad by for example, imposing a tax on foreign source income, can increase domestic welfare and alter the income distribution to favor labor. These arguments follow directly from a characterization of the international producer as a facilitator of capital flows. The available evidence suggests, however, that U.S. multinational firms have a much broader role than transferring abundant U.S. capital abroad. In this paper the firm Is viewed as able to compete abroad for a variety of reasons, including an ability to make use of technological and other cost advantages over local producers. Then, the effect of its operations abroad on the domestic capital stock is no longer so obvious. It is argued that at most a part of the marginal capital employed abroad is obtained at the expense of the capital stock of the domestic economy. The paper then presents a simple model which indicates that domestic labor can either gain or lose relative to capital, and home country welfare can either increase or decline, as a result of restricting the foreign operations of domestic firms. The results depend on the ultimate source of the capital placed abroad, the relative factor intensity of production by the multinational firm, and whether the multinational firm produces the home country's importable or exportable good. Since none of the cases considered seems totally implausible, the case for reducing international production cannot be made on the traditional grounds without further empirical evidence.

Tax Policy and Foreign Direct Investment in the United States

This paper provides some evidence on one aspect of international investment, the impacts of domestic tax policy on foreign direct investment in the United States. The possible impacts, which are discussed in the first section, are complex. For example, an investment incentive which applies to both domestic and foreign investors would be expected to result in an increased foreign investment in the U.S. On the other hand, a savings incentive, which has no direct impact on foreign investors, would nevertheless tend to increase domestic investors' demand for capital assets, thereby driving down the returns expected by foreign investors and possibly resulting in significant decreases in foreign investment. Because of measurement difficulties, we are only partly successful in obtaining precise estimates of this sort of impact. However, the results we do obtain suggest that foreign investment in the U.S. is strongly affected, in the manner predicted, by changes in domestic tax policy.

The rich frequency spectrum of the triple-mode variable AC And

Fourier analysis of the light curve of AC And from the HATNet database reveals the rich frequency structure of this object. Above 30 components are found down to the amplitude of 3 mmag. Several of these frequencies are not the linear combinations of the three basic components. We detect period increase in all three components that may lend support to the Pop I classification of this variable.Comment: Poster presented at IAU Symposium 301, "Precision Asteroseismology - Celebration of the Scientific Opus of Wojtek Dziembowski", 19-23 August 2013, Wroclaw, Polan

Taxation and the Location of U.S. Investment Abroad

Tax policy toward the overseas income of U.S. firms is an important issue since foreign investment accounts for a sizabLe fraction of total investment by U.S. firms. At present there is no consensus on the degree to which U.S. firms respond to tax incentives when making international investment decisions. This paper seeks to shed light on this issue. Because the tax systems of (at least) two countries are involved,the specification of tax incentives is far from trivial. For example, U.S.treatment is based on the foreign tax credit mechanism. In its purest form,this mechanism would insure that the net tax rate on all income of U.S. firms would be equal to the U.S. rate, rendering the tax rates in the host countries irrelevant. In fact, actual U.S. tax practice is far removed from an idealized foreign tax credit mechanism. For instance the U.S. tax is not collected until income is repatriated from abroad; section I points out that deferral changes the incentive effects in fundamental ways. Foreign income tax rates definitely do matter in theory; in fact, they may be of overriding importance.The remainder of the paper seeks to test these theoretical considerations. First,we describe the cross-section data that were collected for this purpose. Then, we report the result that U.S. firms respond to net rates of return in general and to properly specified tax rates in particular.

A total life prediction model for stress concentration sites

Fatigue crack growth tests were performed on center crack panels and radial crack hole samples. The data were reduced and correlated with the elastic parameter K taking into account finite width and corner crack corrections. The anomalous behavior normally associated with short cracks was not observed. Total life estimates for notches were made by coupling an initiation life estimate with a propagation life estimate

The HATNet and HATSouth Exoplanet Surveys

The Hungarian-made Automated Telescope Network (HATNet) has been in operation since 2003, with the key science goal being the discovery and accurate characterization of transiting extrasolar planets (TEPs) around bright stars. Using six small, 11\,cm\ aperture, fully automated telescopes in Arizona and Hawaii, as of 2017 March, it has discovered and accurately characterized 67 such objects. The HATSouth network of telescopes has been in operation since 2009, using slightly larger, 18\,cm diameter optical tubes. It was the first global network of telescopes using identical instrumentation. With three premier sites spread out in longitude (Chile, Namibia, Australia), the HATSouth network permits round-the-clock observations of a 128 square arcdegree swath of the sky at any given time, weather permitting. As of this writing, HATSouth has discovered 36 transiting exoplanets. Many of the altogether ~100 HAT and HATSouth exoplanets were the first of their kind. They have been important contributors to the rapidly developing field of exoplanets, motivating and influencing observational techniques, theoretical studies, and also actively shaping future instrumentation for the detection and characterization of such objects.Comment: Invited review chapter, accepted for publication in "Handbook of Exoplanets", edited by H.J. Deeg and J.A. Belmonte, Springer Reference Work

Development of TPS flight test and operational instrumentation

Thermal and flow sensor instrumentation was developed for use as an integral part of the space shuttle orbiter reusable thermal protection system. The effort was performed in three tasks: a study to determine the optimum instruments and instrument installations for the space shuttle orbiter RSI and RCC TPS; tests and/or analysis to determine the instrument installations to minimize measurement errors; and analysis using data from the test program for comparison to analytical methods. A detailed review of existing state of the art instrumentation in industry was performed to determine the baseline for the departure of the research effort. From this information, detailed criteria for thermal protection system instrumentation were developed