Tax progression: International and intertemporal comparisons using LIS data

The conventional approach to comparing tax progression (using local measures, global measures or dominance relations for first moment distribution functions) often lacks applicability to the real world: local measures of tax progression have the disadvantage of ignoring the income distribution entirely. Global measures are affected by the drawback of all aggregation, viz. ignoring structural differences between the objects to be compared. Dominance relations of comparing tax progression depend heavily on the assumption that the same income distribution holds for both situations to be compared, which renders this approach impossible for international and intertemporal comparisons. Based on the earlier work of one of the authors, this paper develops a unified methodology to compare tax progression for dominance relations under different income distributions. We address it as uniform tax progression for different income distributions and present the respective approach for both continuous and discrete cases, the latter also being employed for empirical investigations. Using dominance relations, we define tax progression under different income distributions as a class of natural extensions of uniform tax progression in terms of taxes, net incomes, and differences of first moment distribution functions. To cope with different monetary units and different supports of the income distributions involved, we utilized their transformations to population and income quantiles. Altogether, we applied six methods of comparing tax progression, three in terms of taxes and three in terms of net incomes, which we utilized for empirical analyses of comparisons of tax progression using data from the Luxembourg Income Study. This is the first paper that performs international and intertemporal comparisons of uniform tax progression with actual data. For our analysis we chose those countries for which LIS disposes of data on gross incomes, taxes, payroll taxes and net incomes. This pertains to 15 countries, out of which we selected 13. This gave rise to 78 international comparisons, which we carried out for household data, equivalized data, direct taxes and direct taxes inclusive of payroll taxes. In total we investigated 312 international comparisons for each of the six methods of comparing tax progression. In two thirds of all cases we observed uniformly greater tax progression for international comparisons. In a bit more than one fifth of all cases we observed bifurcate tax progression, that is, progression is higher for one country up to some population or income quantile threshold, beyond which the situation is the opposite, i.e., progression is higher for the second country. No clear-cut findings can be reported for just one tenth of all cases. But even in these cases some curve differences are so small that they may well be ignored. We also test consistency of our results with regard to the six methods of comparing tax progression and present here twelve (Germany, the UK and the US) plus four comparing Germany and Sweden out of the total of 312 graphs, each containing six differences of first moment distribution functions. These differences can be interpreted as intensity of greater tax progression. We demonstrate the overall picture of uniform tax progression for international comparisons using Hasse diagrams.Concerning intertemporal comparisons of tax progression, we present the results for the US, the UK, and Germany for several time periods. We align our findings with respect to major political eras in these countries, e.g., G. Bush senior, W. Clinton, and G. Bush junior for the United States; M. Thatcher, J. Major, and A. Blair for the United Kingdom, and for Germany, the last year before German re-unification (1989), the beginning of H. Kohl’s last term as chancellor (1994), and G. Schröder (2000). In addition, we study sensitivity of our results to the equivalence scale parameter.income tax progression, measurement of uniform tax progression, comparisons of tax progression, tax progression with different income distributions.

Skewness, tax progression, and demand for redistribution : evidence from the UK

We introduce a skewness-based approach to measure tax progression and demand for redistribution. Adapting a novel, quantilebased statistical measure of skewness to right-skewed income distributions, we uncover its political economy foundation, by simultaneously relating the same measure to the classical model of income redistribution due to Meltzer and Richard (1981), to the Prospect Of Upward Mobility (POUM) mechanism due to B`enabou and Ok (2001), and to the progressivity of a tax schedule. In an empirical analysis of UK income distributions in 1979 – 2013, we find that skewness has increased over time, with the rich moving further away from the median. While the magnitude of the increase has remained small enough so that observed redistribution (or lack thereof ) could be consistent with POUM hypothesis, more recent periods show an increase in tax progression

Tax progression: International and intertemporal comparison using LIS data

The conventional approach to comparing tax progression (using local measures, global measures or dominance relations for first moment distribution functions) often lacks applicability to the real world: local measures of tax progression have the disadvantage of ignoring the income distribution entirely. Global measures are affected by the drawback of all aggregation, viz. ignoring structural differences between the objects to be compared. Dominance relations of comparing tax progression depend heavily on the assumption that the same income distribution holds for both situations to be compared, which renders this approach impossible for international and intertemporal comparisons. Based on the earlier work of one of the authors, this paper develops a unified methodology to compare tax progression for dominance relations under different income distributions. We address it as uniform tax progression for different income distributions and present the respective approach for both continuous and discrete cases, the latter also being employed for empirical investigations. Using dominance relations, we define tax progression under different income distributions as a class of natural extensions of uniform tax progression in terms of taxes, net incomes, and differences of first moment distribution functions. To cope with different monetary units and different supports of the income distributions involved, we utilized their transformations to population and income quantiles. Altogether, we applied six methods of comparing tax progression, three in terms of taxes and three in terms of net incomes, which we utilized for empirical analyses of comparisons of tax progression using data from the Luxembourg Income Study. This is the first paper that performs international and intertemporal comparisons of uniform tax progression with actual data. For our analysis we chose those countries for which LIS disposes of data on gross incomes, taxes, payroll taxes and net incomes. This pertains to 15 countries, out of which we selected 13. This gave rise to 78 international comparisons, which we carried out for household data, equivalized data, direct taxes and direct taxes inclusive of payroll taxes. In total we investigated 312 international comparisons for each of the six methods of comparing tax progression. In two thirds of all cases we observed uniformly greater tax progression for international comparisons. In a bit more than one fifth of all cases we observed bifurcate tax progression, that is, progression is higher for one country up to some population or income quantile threshold, beyond which the situation is the opposite, i.e., progression is higher for the second country. No clear-cut findings can be reported for just one tenth of all cases. But even in these cases some curve differences are so small that they may well be ignored. We also test consistency of our results with regard to the six methods of comparing tax progression and present here twelve (Germany, the UK and the US) plus four comparing Germany and Sweden out of the total of 312 graphs, each containing six differences of first moment distribution functions. These differences can be interpreted as intensity of greater tax progression. We demonstrate the overall picture of uniform tax progression for international comparisons using Hasse diagrams. Concerning intertemporal comparisons of tax progression, we present the results for the US, the UK, and Germany for several time periods. We align our findings with respect to major political eras in these countries, e.g., G. Bush senior, W. Clinton, and G. Bush junior for the United States; M. Thatcher, J. Major, and A. Blair for the United Kingdom, and for Germany, the last year before German re-unification (1989), the beginning of H. Kohl's last term as chancellor (1994), and G. Schröder (2000). In addition, we study sensitivity of our results to the equivalence scale parameter. --income tax progression,measurement of uniform tax progression,comparisons of tax progression,tax progression with different income distributions

News we like to share : how news sharing on social networks influences voting outcomes

More voters than ever get political news from their friends on social media platforms. Is this bad for democracy? Using context-neutral laboratory experiments, we find that biased (mis)information shared on social networks affects the quality of collective decisions relatively more than does segregation by political preferences on social media. Two features of subject behavior underlie this finding: 1) they share news signals selectively, revealing signals favorable to their candidates more often than unfavorable signals; 2) they naıvely take signals at face value and account for neither the selection in the shared signals nor the differential informativeness of news signals across different source

Correlated Equilibria in Voter Turnout Games

Communication is fundamental to elections. This paper extends canonical voter turnout models to include any form of communication, and characterizes the resulting set of correlated equilibria. In contrast to previous research, high-turnout equilibria exist in large electorates and uncertain environments. This difference arises because communication can be used to coordinate behavior in such a way that voters find it incentive compatible to always follow their signals past the communication stage. The equilibria have expected turnout of at least twice the size of the minority for a wide range of positive voting costs, and show intuitive comparative statics on turnout: it varies with the relative sizes of diff t groups, and decreases with the cost of voting. This research provides a general micro foundation for group-based theories of voter mobilization, or voting driven by communication on a network

Call Market Experiments: Efficiency and Price Discovery through Multiple Calls and Emergent Newton Adjustments

We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled “call”. The markets are independent trading “days” with two calls each day preceded by continuous and public order flow. Markets approach the competitive equilibrium over time. The price formation dynamics operate through the flow of bids and asks configured as the “jaws” of the order book with contract execution structured by an underlying mathematical principle, the Newton method for solving systems of equations. Thus, both excess demand and its slope play a systematic role in call market price discovery

Communication Among Voters Benefits the Majority Party

How does communication among voters affect turnout? And who benefits from it? In a laboratory experiment in which subjects, divided into two competing parties, choose between costly voting and abstaining, we study three pre-play communication treatments: No Communication, a control; Public Communication, where all voters exchange public messages through computer chat; and Party Communication, where messages are also exchanged but only within one's own party. Our main finding is that communication always benefits the majority party by increasing its expected turnout margin and, hence, its expected margin of victory and probability of winning the election. Party communication increases overall turnout, while public communication increases turnout with a high voting cost but decreases it with a low voting cost. With communication, we find essentially no support for the standard Nash equilibrium predictions and limited consistency with correlated equilibrium

Call market experiments : efficiency and price discovery through multiple calls and emergent newton adjustments

We study multiple-unit, laboratory experimental call markets in which orders are cleared by a single price at a scheduled “call”. The markets are independent trading “days” with two calls each day preceded by continuous and public order flow. Markets approach the competitive equilibrium over time. The price formation dynamics operate through the flow of bids and asks configured as the “jaws” of the order book with contract execution featuring elements of an underlying mathematical principle, the Newton-Raphson method for solving systems of equations. Both excess demand and its slope play a systematic role in call market price discovery

Communication among voters benefits the majority party

How does communication among voters affect turnout? In a laboratory experiment, subjects, divided into two competing parties, choose between costly voting and abstaining. Pre-play communication treatments, relative to the No Communication control, are Public Communication (subjects exchange public messages through computers) and Party Communication (messages are public within one's own party). Communication benefits the majority party by increasing its turnout margin, hence its winning probability. Party communication increases turnout; public communication decreases total turnout with a low voting cost. With communication, there is no support for Nash equilibrium and limited consistency with correlated equilibrium