Fear of Nuclear War and Intercountry Differences in the Rate of Saving

This paper demonstrates that a survey-based measure of the perceived likelihood of nuclear war in a country is negatively correlated with the country's rate of net private saving, holding other determinants of saving constant. This result is established using date on twenty OECD countries for the period 1981-4. The measure of the perceived likelihood of nuclear war is calculated from surveys conducted in each country by the Gallup International Research Institutes. The magnitude of the estimated' effect Is large, suggesting that an increase of 10 percent in the fraction of the population that believes a world war is likely is associated with a decline of 4.1 percentage points in the net private saving rate, This finding is consistent with other evidence based on U.S. aggregate time series end cross-individual data suggesting that fear of nuclear war decreases savings. That proposition has profound implications for the interpretation of the performance of the post-nuclear world economy.

Old George Orwell Got it Backward: Some Thoughts on Behavioral Tax Economics

It is entirely appropriate that the study of public finance take seriously “behavioral” inconsistencies with traditional models of individual and collective decision-making. This raises the question of whether the state should play a role in protecting individuals from themselves, and whether individuals are susceptible to manipulation, or even exploitation, by the people who comprise the state. In this essay I address one aspect of this issue – how it affects an economic analysis of tax systems. In addressing this task I ask, and offer some tentative answers to, what is distinctive about behavioral tax economics as a sub-field of behavioral economics and as a sub-field of tax economics.complexity, compliance

Optimal Taxation and Optimal Tax Systems

The theory of optimal taxation has , for the pas two decades , been the reigning normative approach of taxation. This paper argues that , in its current state, optimal tax theory is incomplete as a guide to action concerning many critical issues in tax policy. It is incomplete because it has not yet come to terms with taxation as a system of coercively collecting revenues from individuals who will tend to resist. The coercive nature of collection taxes implies that the resource cost of implementing a tax system have been and will continue to be a critical determinant of appropriate tax policy. The paper first presents the three cornerstone propositions of optimal tax theory, and then it discusses the influence of these propositions on recent tax policy developments. It concludes by sketching an alternative to optimal taxation, called the theory of optimal tax systems, which embraces the insights of optimal taxation but also considers the technology of raising taxes and the constraints placed upon tax policy by that technology. The optimal tax systems perspective is shown to shed light on the choice of tax instruments, the problem of tax evasion, and the appropriate tax treatment of capital income.

Free-Trade Taxation and Protectionist Taxation

This paper explores the normative theory of international taxation by recasting it in parallel with the theory of international trade. It first sets out a definition of 'free trade taxation,' first in the global context and then in the unilateral context. It then evaluates against this standard the existing international tax regime and the U.S. international tax policy, and characterizes which aspects of tax policy are free trade and which are protectionist, differentiating the 'predatory protectionism' of tax havens and the 'ownership protectionism' of tax policies that favor domestically- resident multinational corporations.

Tax Effects on the Allocation of Capital Among Sectors and Among Individuals: A Portfolio Approach

This paper deals with the allocational effects and implications for efficiency of a tax system in which the rate of tax on capital income differs depending on the recipient of the income and on the type of capital producing the income. It suggests that, in their attempts to measure the distortionary effect of the U.S. capital income tax system, economists may have been looking in the wrong places. In the presence of uncertainty, the intersectoral distortion may be much less than had previously been imagined. However, the tax system distorts at two other margins which have not received much attention. It distorts the inter-household allocation of the housing stock, since the after-tax rate of interest is one component of the opportunity cost of owner-occupied housing. It also distorts the inter-household allocation of risk-bearing. Calculations using a simple commutable general equilibrium model suggest that the excess burden from these latter two distortions are significant components of the total distortionary impact of the tax system.

The Economics of Corporate Tax Selfishness

This paper offers an economics perspective on corporate tax noncompliance. It first reviews what is known about the extent and nature of corporate tax noncompliance and the resources devoted to enforcement. It then addresses the supply of corporate noncompliance -- the industrial organization of the tax shelter industry -- as well as the demand for corporate tax noncompliance, focusing on how the standard Allingham-Sandmo approach needs to be modified when applied to public corporations. It then discusses the implications of a supply-and-demand approach for the analysis of the incidence and efficiency cost of corporate income taxation, and the very justification for a separate tax on corporation income. Along the way it addresses policy proposals aimed at increased disclosure of corporate tax activities to both the IRS and to the public.

The effect of tax simplification on individuals

Tax reform

The Optimal Size of a Tax Collection Agency

This paper addresses the optimal degree of law enforcement regarding tax evasion. It derives the conditions that characterize the optimal size of a tax collection agency, and then provides a simple interpretation of the conditions in terms of excess burden.The paper clarified earlier findings that suggest that the optimal size should be set higher than a simple cost-benefit calculation would indicate. It concludes with a numerical example that illustrates the optimality condition and demonstrates that a policy based on a naive cost-benefit analysis of the tax collection agency could result in a substantial overcommitment of resources.