Fiscal Equalization, Tax Salience, and Tax Competition

Jurisdictions that engage in inter-regional tax competition usually try to attenuate competitive pressures by substituting salient tax instruments with hidden ones. On this effect, we investigate the efficiency consequences of inter-regional tax competition and fiscal equalization in a federal system when taxpayers fail to optimally react on shrouded attributes of local tax policy. If the statuary tax rate is a relatively salient instrument and taxpayers pay low attention to the quality and the frequency of tax enforcement, the underlying substitution of tax instruments with the aim of reducing the perceived tax price may suppress the under-exploitation of tax bases that is typically triggered by fiscal equalization

Fiscal Equalization, Tax Salience, and Tax Competition

This paper analyzes the efficiency consequences of local revenue policies if jurisdictions try to attenuate the pressures of inter-regional competition for mobile factors by substituting attention-grabbing tax instruments that spotlight an additional tax burden with rather inconspicuous ones. We show that the substitution of tax instruments with the view to reduce the perceived tax price may suppress the under-exploitation of tax bases that typically goes along with fiscal equalization

Eine flexible Ländersteuer bei einem hohen Ausgleich von Finanzkraftunterschieden

Am Ende des Jahres 2019 tritt das Finanzausgleichsgesetz außer Kraft. Im Zuge dessen ergibt sich eine historische Chance, die Reibungsverluste im gegenwärtigen Ausgleichssystem durch eine Neuordnung der Bund-Länder-Finanzbeziehungen zu verringern. Ein aktuell viel diskutierter Vorschlag sieht eine flexible Ländersteuer vor. In diesem Beitrag wird analysiert, welche Auswirkungen eine solche erweiterte Steuerautonomie für die Bundesländer hätte und welche Möglichkeiten sich diesbezüglich für eine anreizfreundliche Neugestaltung des Finanzausgleichs mit hoher Ausgleichsintensität ergeben würden

Bracket creeps: Bane or boon for the stability of numerical budget rules?

As taxpayers typically pay low attention to a small inflation-induced bracket creep of the income tax, policy-makers tend to postpone its correction into the future. However, the fiscal illusion fades away and political pressure for a tax relief arises since after some years the cumulative increase of the average tax rate exceeds a critical threshold. Using Germany as an example, this paper shows that bracket creeps can provoke revenue cycles in public budgets hindering governments' compliance with the numerical budget rules. An indexation of the tax tariff could prevent such fluctuations and thus provides a favourable framework for the debt rule.This draft: August 24, 201

Auf welche Frage sind zwei Billionen die Antwort?

Alle Jahre wieder wird berechnet, was wohl die Deutsche Einheit gekostet habe. Zuletzt veröffentlichte die Welt am Sonntag, dass knapp zwei Billionen Euro an Fördergeldern von West nach Ost geflossen seien. Die Berechnung dieser Kennzahl ist wenig umstritten, die Größenordnung ist einigermaßen plausibel: Es werden Nettotransfers von West nach Ost zwischen 1991 und 2013 aufsummiert (Zahlungen aus dem Länderfinanzausgleich, Solidarpakt II, Fonds Deutsche Einheit, regionaler Saldo der Sozialversicherungsleistungen usw.). Aber was bedeutet diese Zahl? Sind zwei Billionen Euro viel oder wenig in Relation zu dem damit Erreichten

Dezentrale Steuerverwaltung und interregionaler Wettbewerb im deutschen Finanzföderalismus

Ein optimal ausgestalteter Steuervollzug sollte die gesamtwirtschaftliche Effizienz des Steuersystems sicherstellen. In einem föderalen Staat stellt sich daher auch die Frage, in welchem Verantwortungsbereich die Finanzverwaltung angesiedelt sein sollte, um dieser Funktion möglichst gerecht zu werden. Es wird verdeutlicht, dass es im deutschen Finanzföderalismus unter Berücksichtigung des gegenwärtig geltenden Finanzausgleichsgesetzes einen eindeutigen komparativen Vorteil weder für eine Finanzverwaltung in Verantwortung des Bundes noch für eine solche in Verantwortung der Länder gibt

The Private Provision of International Impure Public Goods: the Case of Climate Policy

We discuss a tax-transfer scheme that aims at addressing the under-provision problem associated with the private supply of international public goods and at bringing about Pareto optimal allocations internationally. In particular, we consider the example of the global public good ‘climate stabilisation’, both in an analytical and a numerical simulation model. The proposed scheme levies Pigouvian taxes globally, while international sidepayments are employed in order to provide incentives to individual countries for not taking a free-ride from the international Pigouvian tax scheme. The side-payments, in turn, are financed via the environmental taxes. As a distinctive feature we take into account ancillary benefits that may be associated with local public characteristics of climate policy. We determine the positive impact that ancillary effects may exert on the scope for financing side-payments via environmental taxation. A particular attractive feature of ancillary benefits is that they arise shortly after the implementation of climate policies and therefore yield an almost immediate payback of investments in abatement efforts. Especially in times of high public debt levels, long periods of amortisation would tend to reduce political support for investments in climate policy.

The Dilemma of Delegating Search: Budgeting in Public Employment Services

The poor performance often attributed to many public employment services may be explained in part by a delegation problem between the central office and local job centers. In markets characterized by frictions, job centers function as match-makers, linking job seekers with relevant vacancies. Because their search intensity in contacting employers and collecting data is not verifiable by the central authority, a typical moral hazard problem can arise. To overcome the delegation problem and provide high-powered incentives for high levels of search effort on the part of job centers, we propose output-related schemes that assign greater staff capacity to agencies achieving high strike rates.matching unemployment, public employment service, delegation problem, moral hazard, search theory

The Dilemma of Delegating Search: Budgeting in Public Employment Service

The Recent German research has suggested that extending the number of caseworkers may have a very positive effect on PES performance. The present paper accepts this key insight but argues that there are other factors that may independently drive outcomes and in particular local agents’ discretion. That is, it focuses on the delegation problem between the central office and the local job center ‘matchmakers.’ Because their (search) effort in contacting employers and collecting data is not verifiable by the central authority, a typical moral hazard problem can arise. To overcome the delegation problem and provide high‐powered incentives for increased levels of search effort on the part of job centers, we propose output‐related schemes that assign greater staff capacity to agencies achieving high strike rates.matching unemployment, public employment service, active labor market policy, moral hazard, search theory

Policies to Internalize Reciprocal International Spillovers

An effective policy scheme to overcome the suboptimal low provision levels of global public goods is developed in this paper. By suggesting a decentralized approach to raise environmental public good provision levels we take account of the lack of a coercive global authority that is able to enforce efficient international environmental regulations. In our model individual regions voluntarily commence international negotiations on public good provision, which are accompanied by side-payments. These side-payments are financed by means of regional externality-correcting taxes. Side-payments and national tax rates are designed in a mutually dependent way. The decentralized scheme we recommend for approaching Pareto efficient Nash equilibria is based on the ideas of Coasean negotiations and Pigouvian taxes. As it is implementable for a wide class of Nash solutions, it is applicable to various international externality problems.transfers, environmental taxation