Family Labor Supply With Taxes

Over the period 1960 - 1983 the proportion of federal tax revenue raised by taxation of labor supply has risen from 57-77 percent. In this paper, we specify and estimate a model of family labor supply which treats both federal and state taxation. Husbands and wives labor supply are treated jointly rather than in aseparate manner as in previous research. A method to calculate the virtual wage for nonworking spouses is used within a utility maximizing framework to treat correctly the joint family labor supply decision. Joint family efforts are found to be important. The efficiency cost (deadweight loss) of labor taxation is estimated to be 29.6% of tax revenue raised. The effect of the new 10% deduction to ease the marriage tax for working spouses leads to a prediction of 3.8% increase in wives labor supply and a .9% decrease in husbands labor supply.Overall taxes paid are predicted to decrease by 3.4%.

Enhanced Cooperation in an Asymmetric Model of Tax Competition

This paper analyzes enhanced cooperation agreements in corporate taxation in a three country tax competition model where countries differ in size. We characterize equilibrium tax rates and the optimal tax responses due to the formation of an enhanced cooperation agreement. Conditions for strategic complementarity or strategic substitutability of tax rates are crucial for the welfare effects of enhanced cooperation. Simulations show that enhanced cooperation is unlikely to be feasible for small countries. When enhanced cooperation is feasible, it may hamper global harmonization. Only when countries are of similar size is global harmonization a feasible outcome.tax coordination, asymmetry, enhanced cooperation agreements, strategic tax response

Chemical tracers of episodic accretion in low-mass protostars

Aims: Accretion rates in low-mass protostars can be highly variable in time. Each accretion burst is accompanied by a temporary increase in luminosity, heating up the circumstellar envelope and altering the chemical composition of the gas and dust. This paper aims to study such chemical effects and discusses the feasibility of using molecular spectroscopy as a tracer of episodic accretion rates and timescales. Methods: We simulate a strong accretion burst in a diverse sample of 25 spherical envelope models by increasing the luminosity to 100 times the observed value. Using a comprehensive gas-grain network, we follow the chemical evolution during the burst and for up to 10^5 yr after the system returns to quiescence. The resulting abundance profiles are fed into a line radiative transfer code to simulate rotational spectra of C18O, HCO+, H13CO+, and N2H+ at a series of time steps. We compare these spectra to observations taken from the literature and to previously unpublished data of HCO+ and N2H+ 6-5 from the Herschel Space Observatory. Results: The bursts are strong enough to evaporate CO throughout the envelope, which in turn enhances the abundance of HCO+ and reduces that of N2H+. After the burst, it takes 10^3-10^4 yr for CO to refreeze and for HCO+ and N2H+ to return to normal. The chemical effects of the burst remain visible in the rotational spectra for as long as 10^5 yr after the burst has ended, highlighting the importance of considering luminosity variations when analyzing molecular line observations in protostars. The spherical models are currently not accurate enough to derive robust timescales from single-dish observations. As follow-up work, we suggest that the models be calibrated against spatially resolved observations in order to identify the best tracers to be used for statistically significant source samples.Comment: Accepted by A&A; 12 pages, 7 figure

Taxation and Foreign Direct Investment: A Synthesis of Empirical Research

This paper reviews the empirical literature on the impact of company taxes on the allocation of foreign direct investment. We make the outcomes of 25 empirical studies comparable by computing the tax rate elasticity under a uniform definition. The mean value of the tax rate elasticity in the literature is around -3.3, i.e. a 1%-point reduction in the host-country tax rate raises foreign direct investment in that country by 3.3%. There exists substantial variation across studies, however. By performing a meta analysis, the paper aims to explain this variation by the differences in characteristics of the underlying studies. Systematic differences between studies are found with respect to the type of foreign capital data used, and the type of tax rates adopted. We find no systematic differences in the responsiveness of investors from tax credit countries and tax exemption countries.

Pigou Meets Mirrlees: On the Irrelevance of Tax Distortions for the Second-Best Pigouvian Tax

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public funds. The reason is that the marginal cost of public funds equals unity in the optimal tax system, since marginal distortions of taxation are equal to marginal distributional gains. The Pigouvian tax needs to be modified, however, if polluting commodities or environmental quality are more complementary to leisure than non-polluting commodities are.marginal cost of public funds, optimal environmental taxation, optimal redistribution, externalities

Tax Policy in a Model of Search with Training

This paper develops a model of search on the labour market with training. The model reveals how the tax system can restore the social optimum if the Hosio s condition is not satisfied in the private equilibrium. Furthermore, the effects are explored of a second-best reform from average to marginal taxes when a given amount of public revenue has to be raised. We find that (i) a marginal wage tax is less distortionary to raise revenue than is an average tax per job, provided that training is not distorted initially; (ii) this conclusion may reverse in the presence of training distortions; (iii) marginal wage taxes are less distortionary in economies characterized by commitment in wage bargaining, such as the European labour market. Hence, tax reforms that reduce the average tax per job and raise the marginal wage tax, such as an EITC or a negative income tax, are more attractive in Europe than in the US.

What a difference does it make? Understanding the empirical literature on taxation and international capital flows

This study explains the variation in empirical estimates in the literature on the elasticity of foreign direct investment with respect to company tax levels. To that end, the meta analysis of De Mooij and Ederveen (2003) is extended by considering an alternative classification of the literature and by including new studies that have recently become available. Specific attention is paid to two new dimensions: the spatial and the time dimension of the underlying studies.Foreign direct investment, corporate taxation, meta analysis, international capital flows,de Mooij,Ederveen

Corporate Tax Policy, Entrepreneurship and Incorporation in the EU

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. We exploit a panel of European data on firm births and legal form of business to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates – possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s.corporate tax, personal tax, entrepreneurship, incorporation, income shifting

Turkish Delight – Does Turkey’s accession to the EU bring economic benefits?

We explore the economic implications of the possible Turkish accession to the European Union. We focus on three main changes associated with Turkish membership: (i) accession to the internal European Market; (ii) institutional reforms in Turkey triggered by EU-membership; and (iii) migration in response to the free movement of workers. Overall, the macroeconomic implications for EU countries are small but positive. European exports increase by around 20 percent. Turkey experiences larger economic gains than the EU: consumption per capita is estimated to rise by about 4 percent as a result of accession to the internal market and free movement of labour. If Turkey would succeed in reforming its domestic institutions in response to EU-membership, consumption per capita in Turkey could raise by an additional 9 percent. These benefits would spill over to the EU.Turkey, regional economic integration, general equilibrium model, gravity equations, institutional reform, migration

Corporate tax policy, entrepreneurship and incorporation in the EU

In Europe, declining corporate tax rates have come along with rising tax-to-GDP ratios. This paper explores to what extent income shifting from the personal to the corporate tax base can explain these diverging developments. A panel of European data on firm births and legal form of business was used to analyze income shifting via increased entrepreneurship and incorporation. The results suggest that lower corporate taxes exert an ambiguous effect on entrepreneurship. The effect on incorporation is significant and large. It implies that the revenue effects of lower corporate tax rates - possibly induced by tax competition -- partly show up in lower personal tax revenues rather than lower corporate tax revenues. Simulations suggest that between 10% and 17% of corporate tax revenue can be attributed to income shifting. Income shifting is found to have raised the corporate tax-to-GDP ratio by some 0.2%-points since the early 1990s.Corporate tax, Personal tax, Entrepreneurship, Incorporation, Income shifting, de Mooij, Nicodème