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

Spin Tunneling, Berry phases and Doped Antiferromagnets

Interference effects between Berry phase factors in spin tunneling systems have been discussed in recent Letters by Loss, DiVincenzo and Grinstein and von Delft and Henley. This Comment points out that Berry phases in spin tunneling are important in another interesting case: the two dimensional doped antiferromagnet. I show that the dispersion of a single hole in the t-J model changes sign as $e^{2\pi s}$ where $s$ is the size of the spins. This provides an interpretation of the numerical results for the s=\half model, and a prediction for other spin sizes.Comment: 5 pages, LaTe

How Much Equity Does the Government Hold?

A central point in the recent debate about Social Security in the United States has been the extent to which the federal government should take significant positions in the equity market. But, as this paper shows, the government already has a much more significant, if implicit position in the U.S. equity market through its claim to future tax revenues. Using estimates of the sensitivity of federal tax revenues to stock market returns, I calculate the implicit equity position of the federal government, defined as the equity position that would be as sensitive to the stock market as the present value of federal revenues. Although standard errors are large, point estimates indicate that the implicit federal equity position exceeds the size of the stock market itself, a result that is consistent with the fact that revenues from all sources, not just taxes on corporate source income, are responsive to stock market returns.

Issues in the Measurement and Determinants of Business Saving

This paper begins with a discussion of the measurement of business saving,with the conclusion that even "corrected" measures of business saving are quite inaccurate in the presence of inflation, leading to an overstatement of the recent decline in business saving. The remainder of the paper focuses on the more fundamental issue of why it should matter who saves. Beginning from their relevance proposition associated with the Modigliani-Miller theorem, we consider the channels through which taxation causes the identity of the saver to have real effects. Finally, we consider the relative efficiency of business versus personal savings incentives, in light of our results.

Inflation and the Tax Treatment of Firm Behavior

In the past decade, economists have be-gun to realize that inflation, even when fully anticipated, constitutes a great deal more than a tax on money balances. The primary reason for inflation's wider impact is the existence of a tax system designed with stable prices in mind. This paper offers a brief summary of the effects of inflation on the tax treatment of the firm, focusing on four important decisions the firm makes: the scale of investment; the method of finance; the durability of assets used in production; and the holding period of these assets. There are a number of interesting and related issues which cannot be covered in a paper of this length. As I will be considering inflation that is both uniform and fully anticipated, questions concerning the behavior of the firm in response to uncertainty about inflation, or to a concommitant change in relative prices, will not arise.

The Index of Leading Indicators: "Measurement without Theory," Twenty-Five Years Later

The index of leading economic indicators first developed by the NBER remains a popular informal forecasting tool in spite of the original criticism that its use represents "measurement without theory. " This paper seeks to evaluate the performance of the index in comparison to alternative time series methods in predicting business cycle behavior. While the actual method of choosing the weights for the twelve series included in the index is essentially unnecessary (because the resulting series is indistinguishable from another with uniform weights) the series itself helps explain business cycle behavior, and outperforms an index with econometrically chosen weights.

Fiscal Policy, Past and Present

This paper begins by reviewing the current U.S. fiscal situation and the causes of its recent deterioration. As a guide to possible policy actions, it estimates past responses of revenue and expenditure both at the federal and at the state and local level. Federal fiscal policy is found to be responsive to both economic and fiscal conditions, and this responsiveness may have grown over time. For states, economic conditions are less important, but responses to budget gaps are swifter. Given current conditions, equations for federal revenue and expenditure predict tax cuts and expenditure increases, but of a considerably smaller magnitude than President Bush initially proposed. However, current circumstances are difficult to evaluate because of the enormous implicit entitlements liabilities, which are much more significant today than in the past. This difficulty is but one of the problems facing policy prediction and evaluation.macroeconomics, Fiscal Policy, Past fiscal policy, present fiscal policy

Tax Projections and the Budget: Lessons from the 1980s

Some economists have argued that the disincentive effects of marginal tax rate increases in the 1980s caused revenue to rise by less than had been anticipated. To evaluate the hypothesis, this paper considers OMB revenue forecasts and forecast errors for the period 1982-93. If the revenue gains from tax increases, and the revenue losses from tax cuts, were overstated because of inadequate allowance for behavioral responses, then the forecast errors should be negatively related to the initial revenue estimates of the impact of policy changes. For excise taxes and corporate income taxes, the results suggest that the systematic overprediction of revenues during the period can be explained in part by an underestimate of behavioral responses to taxation.