Why Have Separate Environmental Taxes?

Each environmental tax in the U.S. is designed to collect revenue for a trust fund used to clean up a particular pollution problem. Each might be intended to collect from a particular industry thought to be responsible for that pollution problem, but none represents a good example of an incentive-based tax designed to discourage the polluting activity itself. A different tax for each trust fund means that each tax rate is typically less than one percent. But each separate tax has an extra cost of administration and compliance, since taxpayers must read another set of rules and fill out another set of forms. This paper provides evidence on compliance costs that are high relative to the small revenue from each separate tax. In addition, an input-output model is used to show how current U.S. environmental tax burdens are passed from taxed industries to all other industries. Thus the extra cost incurred to administer each separate tax achieves neither targeted incentives not targeted burdens.

Does Environmental Protection Hurt Low-Income Families?

Umweltschutz; Verteilungswirkung; Haushaltseinkommen; Soziale Kosten; Privater Haushalt; USA

If Labor is Inelastic, Are Taxes Still Distorting?

Three recent papers measure the marginal excess burden of labor taxes in the United States. They obtain very different results even where they all use a zero uncompensated labor supply elasticity and assume that the additional revenue is spent on a public good that is separable in utility. The impression is that other parameters must explain the differences in results. Yet each paper uses a different concept of excess burden. Here, I calculate all three measures in one model and show how conceptual differences explain the results. Only one of these measures isolates the distortionary effects of taxes in a way that depends on the compensated labor supply elasticity. The other two measures incorporate income effects and thus depend on the actual change in labor. This result was obscured because those papers report positive marginal excess burden even with a zero uncomspensated labor supply elasticity. This paper shows conditions under which their measure is zero, and it interprets the measures in light of recent literature.

Which Effective Tax Rate?

In estimating the effects of capital income taxation, different studies measure different effective tax rates. This paper categorizes effective tax rate estimates into six basic types, and discusses the usefulness of each. For marginal effective tax rates, some studies estimate the additional taxes associated with a marginal increase in the inflation and interest rates, while others estimate the additional taxes associated with a marginal increase in investment. Because there are six basic types of rates, because of the different procedures that can be used to estimate each type, and because of different assumptions about the margin, care should be taken in the application and use of effective tax rate estimates.

Six Distributional Effects of Environmental Policy

While prior literature has identified various effects of environmental policy, this note uses the example of a proposed carbon permit system to illustrate and discuss six different types of distributional effects: (1) higher prices of carbon-intensive products, (2) changes in relative returns to factors like labor, capital, and resources, (3) allocation of scarcity rents from a restricted number of permits, (4) distribution of the benefits from improvements in environmental quality, (5) temporary effects during the transition, and (6) capitalization of all those effects into prices of land, corporate stock, or house values. The note also discusses whether all six effects could be regressive, that is, whether carbon policy could place disproportionate burden on the poor.tax incidence, climate policy, capitalization effects, general equilibrium

Income Tax Incentives to Promote Saving

We examine six alternative plans which might be discussed in an effort to increase consumer savings through the personal income tax system in the United States. These plans attempt to affect savings through an increase in the real rate of return either by direct tax cuts on savings or by indexing tax rates against inflation. The paper presents estimates of static and dynamic resource allocation effects for the six plans, and compares them to results obtained in earlier work on the impacts of more sweeping reforms. A medium-scale numerical general equilibrium model is used which integrates the U. S. tax system with consumer demand behavior by household and producer behavior by industry.

A Simulation-Based Welfare Loss Calculation for Labor Taxes with Piecewise-Linear Budgets

Graduated income tax rates and transfer programs create piecewise-linear budget constraints that consist of budget segments and kink points. With any change in these tax rules, each individual may switch between a kink point and a budget segment, between two budget segments, or between two kink points. With errors in the estimated labor supply equation, the new choice is uncertain, and so the welfare effects of a tax change are uncertain. We propose a simulation-based method to compute expected welfare effects that is easy to implement and that fully accounts for uncertainties about choices around kink points. Our method also provides information about expected changes in working hours.

The Taxation of Income from Capital in the United States, 1980-86

Tax rules have changed almost yearly in the United States since 1980. In particular, the Economic Recovery Tax Act of 1981 reduced marginal tax rates and shortened depreciation lifetimes, while the Tax Reform Act of 1986 reduced marginal tax rates, repealed the investment tax credit, and lengthened depreciation lifetimes.