Foregone Revenue Research Articles

Taxation and Corporate Investment in Physical and Knowledge Capital: Tests of Perfect Competition Versus Market Power

This article specifies an intertemporal model of firm behavior consistent with rational expectations, assuming either perfect competition or market power. Non-nested hypothesis tests were used to test the two versions of this model against each other. The test results do not support perfectly competitive industries and instead suggest that firms in these industries exerted some market power. The effects of tax allowances for physical and research and development (R&D) capital on the firms' decisions were computed. From the public sector's point of view, neither of these tax incentives was cost-effective for Turkey's chemical industries during the sample period. Their costs to the treasury in terms of foregone revenues were higher than the investment stimulated by these measures. For Turkey's petroleum derivatives industry, the benefits of the tax allowance for physical investment (increased physical investment) exceeded its costs (foregone tax revenue). The tax allowance for R&D investment, however, was not cost-effective for the petroleum derivatives industry either.

Imperata management strategies used in smallholder rubber-based farming systems

A large proportion of global natural rubber production takes place in Southeast Asia. The majority of this rubber is produced by smallholders. Thailand, Indonesia and Malaysia are the three principal countries involved. In Malaysia and Indonesia the smallholder sector accounts for 72% and 84% of total rubber production respectively. In other countries rubber plays a significant role on a more local basis. Imperata is a serious problem for the smallholder rubber farmer in most of Southeast Asia in three respects: the high cost (labour and/or capital) of opening Imperata-infested land, its competitive effect on rubber and annual intercrops, and the fire hazard that it poses during the dry season as a major source of combustible material. The costs of Imperata to smallholders are substantial in terms of a direct loss through fire and revenue foregone or delayed as a result of competition. Most smallholders intercrop their rubber during the first 1–3 years after planting it, and during this period Imperata is reasonably well controlled. Intercropping is only feasible for a limited period because of limited soil fertility and/or the shading effect of the rubber trees. After intercropping, Imperata tends to establish itself for a few years until it too is shaded out by the rubber. This is the problem period, during which farmers practise only limited weed management, if any.

Assessing the Effectiveness of Saving Incentives

The authors argue that there is more to be learned from recent research on the effectiveness of targeted saving incentives than the wide variation in empirical estimates suggests. They conclude that characterizations of ‘all new saving’ or ‘no new saving’ are extreme IRAs and 401(k) plans appear to stimulate moderate amounts of new saving. The authors suggest a cost-benefit approach to ask: What is the incremental gain in capital accumulation per dollar of foregone revenue? For quite conservative measures of the saving impacts of IRAs or 401(k)s, the incremental gains in capital accumulation per dollar of lost revenue are large.

BALLPARK ESTIMATES: IMPACT OF THE 1994 BASEBALL STRIKE ON THE PENNSYLVANIA ECONOMY

This article examines the effects of foregone gate revenues and reduced visitor days as a result of the 1994 major league baseball strike on Pennsylvania jobs, business activity, and income. The authors use a macroeconomic model of the Pennsylvania economy to estimate that the strike probably had negligible net impacts on the Pennsylvania economy. These findings contradict the popular view that the strike had serious aggregate economic consequences and emphasize that commercial sports activity comprise only a minor share of regional economies.

Housing Allowances, Nonprofit Housing, and Cost-Effective Program Choice

This paper analyses whether a housing allowance program or a nonprofit housing program is more cost effective, i.e., requires a smaller government subsidy for identical quality dwelling units and identical rents charged to tenants. In most cases, we show that the programs are equally costly for the government′s housing department. If private-sector real estate is favourably treated under income tax law, however, a housing allowance will be more cost effective for the housing department; likewise, if nonprofit housing is exempt from certain sales taxes, nonprofit housing will be the more cost-effective program. Nevertheless, after recognizing the foregone tax revenues, the two programs will again be equally costly for the government′s housing and treasury departments together. Still, a housing allowance is shown to be more cost effective if the private sector is more efficient in developing, building, or managing housing, and a nonprofit program is shown to be more cost effective if it receives donated inputs or if nonprofit enterprise is an efficient response to imperfect information.

Senate Takes Up Regulatory Reform

Congress has reconvened following its annual spring district work period. The Senate has before it the task of moving along legislation, already approved by the House in fulfillment of the Republican Contract With America/7 that provides regulatory and legal relief for corporations and individuals. The House, for its part, faces the daunting task of finding a way to pay for the package of corporate and individual tax cuts it approved in early April that by some estimates will cost the government $200 billion in foregone revenue over the next five years. First up on the Senate agenda—it was being debated at press time—was S. 565, a bill that would establish a uniform national product liability law. As reported by the Commerce Committee, the bill would limit punitive damages to cases where an injury was caused by the defendant's conscious, flagrant indifference to the safety of others and the lesser of $250,000 or three times the ...

R&D Tax Policy during the 1980s: Success or Failure?

R&D tax policy in the United States during the nineteen-eighties is evaluated, with particular emphasis placed on quantifying the impact of the R&D tax credit on the R&D investment of manufacturing firms. Using publicly available data on R&D spending at the firm level, I estimate an average tax price elasticity for R&D spending which is in the neighborhood of unity in the short run. Although the effective credit rate is small (less than five percent until 1990), this relatively strong price response means that the amount of additional R&D spending thus induced was greater than the cost in foregone tax revenue. The recent evolution of features of the U.S. corporate tax system which affect R&D is also reviewed and my results are compared with those of previous researchers. The conclusion is that the R&D tax credit seems to have had the intended effect, although it took several years for firms to fully adjust. I also argue that although the high correlation over time of R&D spending at the firm level makes it difficult to estimate long run effects precisely, the same high correlation makes it probable that these effects are large.

Corporate Tax Policy and the Right to Know: Improving State Tax Policymaking By Enhancing Legislative and Public Access

This report examines the need for disclosure of state corporate income tax data in order to facilitate more thoughtful tax policymaking as well as accountability and openness in government. While disclosure of federal income tax data has been resolved by the SEC’s required disclosures of public corporations, the only states that have laws mandating disclosure of information relating to their state’s income tax are Arkansas, West Virginia, and Massachusetts. Firm-specific disclosure of corporate tax information at the state level is necessary for informed tax policy, essential to public understanding of corporate tax reform issues, and will complement SEC mandated disclosures. Because of the large sums of money involved in corporate taxation, disclosure is necessary to analyze how the costs of government are distributed and which companies and industries bear the burden of the tax within each state. Public understanding is essential in order to affect economic reform in a democratic setting regardless of whether the policy is founded on sound theoretical reasoning and the public must know which corporations are receiving incentives in order to judge whether the benefits justify the foregone revenue. Firm-specific data, in particular, is necessary in order to get the benefits of disclosure. Compared with aggregate data, firm-specific information will allow tax policy judgements to be made that could not be made in the abstract, and will also facilitate inter and intra-industry comparisons. Arguments against disclosure at the state level that firm-specific disclosure might reveal proprietary information, violate a corporation’s right to privacy, discourage filing of accurate tax returns, or even undercut a state’s business climate all fall short of rebutting the benefits that come from disclosure and are largely unremarkable arguments when viewed in comparison with the type of disclosure mandated by the SEC.

Estimating the Costs of Public/Private Infrastructure Deals in Municipal Government

City governments in the U.S. enter into agreements with private developers to provide infrastructure such as roads, drainage systems, and utilities. From a normative perspective, public managers should calculate the costs to city government to execute these public/private deals before they agree to participate. Four cost categories deserve attention: (1) initial expenses required for project approval by city officials (approval spending); (2) spending for changes during project construction (momentum spending); (3) public spending to entice private investment (incentive spending); and (4) city government spending to maintain and operate the new infrastructure (operations spending). This paper calculates spending categories in a case study of Alliance Airport, a major public/private development in Fort Worth, Texas, requiring $63 million of direct and indirect public expenditures. Officials estimated less than 25 percent of total spending before project approval. Two-thirds of the public costs are foregone revenues associated with incentive spending by city government. The findings suggest city administrators and legislators should focus more closely on a precise calculation of these four types of costs before agreeing to public/private economic development deals.

Commercial energy subsidies in developing countries Opportunity for reform

Energy subsidies are still pervasive in many developing countries. Oil exporters heavily subsidize all domestic oil consumption while several importers subsidize particular petroleum products. Estimates of foregone revenues in the oil-exporting countries approximate one-third of all oil export revenues. Finally, subsidies for electricity, natural gas and coal are even more pervasive. In virtually all of the countries studies, the prices of these fuels do not reflect marginal costs.

Tax Expenditures for Local Governments

Foregone revenues of state and local governments have been mostly unreported. This is still a neglected subject in governmental accounting. Such significant amounts can make a difference in the choice between direct and indirect spending, and more budget officers are expected to consider the tax expenditure report as a supplement to budget documents.

An evaluation of split litter suckling as a method of reducing pre-weaning mortality in pigs

Pre-weaning mortality in pigs in the United Kingdom is estimated to be 11.6% ie the loss of around 2 million piglets every year. If only the cost of piglet production is considered this represents a loss to the industry of approximately £28 million each year. In fact the revenue foregone from finished pigs is much greater (MAFF,1985).Over 50% of the losses of liveborn piglets occur in the first 48 to 72 hours after birth. Around 75% of mortalities are due to the two, often related causes, overlying by the dam and starvation (English and Morrison, 1984).Mortality is inversley related to birth weight, small piglets being affected by competition from their larger litter mates and having lower energy reserves. To reduce piglet mortality care must therefore be concentrated, especially on small weakly piglets in the first 48 hours of life.

A hedonic price model of the Paris carcase lamb market

Based on a lamb carcass classification and pricing exercise in the Paris wholesale market at Rungis, an equation was estimated which regresses prices on farm-based and factory-based quality aspects and on country of origin of the carcasses. The revenue foregone per car- cass by each supplying country, because of divergence from the optimal quality, is quantified and allocated to particular quality attributes. For all countries quality improvement would yield substantially increased revenue. Supplying countries other than France suffer a substantial country-of-origin discount which is not justified on quality considerations. Further research is necessary on this phenomenon. Copyright 1986 by Oxford University Press.

Energy Policy in a Price‐Regulated Developing Economy: A Study of Egypt

As with many other developing economies, Egypt pursues a policy of keeping domestic energy prices below border prices. This entails both financial subsidies to energy producers and users, and significant opportunity costs in terms of foregone foreign and government revenues. This article details the price structure and uses two models to assess the macroeconomic and microeconomic impacts of policies designed to correct the domestic/border price disparity.

The Individual Housing Account

This paper summarizes the available information about the proposed Individual Housing Account (IHA), a tax‐exempt savings account designed to facilitate the accumulation of the downpayment on a home for would‐be first‐time homebuyers. We review both the limited body of U.S. research and data on a similar Canadian program which has been in existence since 1974. We find little evidence to suggest that the IHA would stimulate homeownership or housing construction to any noticeable extent. It would enable potential buyers to save enough for a downpayment more rapidly than they now can, but this would increase homeownership only during the start‐up period for the program, not in the long run. We also estimate the foregone tax revenues from the program to be in the neighborhood of $2 to $3 billion annually, once the program has reached maturity.

Rent Controls in Ontario: Roofs or Ceilings?

This paper describes the rent control program in Ontario and discusses the consequences of these controls. It indicates that rent controls caused both a small nominal decline and a large real decline in the per unit value of rental apartments, substantially reduced new rental housing starts, generated a rental housing shortage, created a dual market with significant rent differences between the controlled and uncontrolled (new construction) sectors, and imposed large costs on government in the form of foregone tax revenues and increased rental housing subsidies. The paper also indicates some of the political responses to the developing economic effects, such as the imposition of additional land use controls and increased government spending programs to stimulate new rental construction.

PRICE‐QUALITY RELATIONSHIPS FOR BEEF IN SMITHFIELD MARKET

Smithfield beef prices are regressed on quality measurements made on beef selling in Smithfield market. Optimal weight, conformation and fat levels are derived and the revenue foregone by not obtaining these optima is estimated for Scotch, English, Republic of Ireland and Northern Irish beef. For other quality characteristics Scotch beef is taken as the norm and the revenue foregone by not producing to Scotch standards is estimated for English, Republic of Ireland and Northern Irish beef. Differences in quality levels are found to explain only a relatively small proportion of the price gap which exists between Scotch beef and beef from the three other areas.

Evaluation of Revenue Potential of Excise Taxation in India: Commoditywise Analysis

Excise taxation, which came in vogue in India in the early thirties as a measure to recover the revenue foregone in the process of providing tariff protection to the Indian industries and also as a measure to finance the War, has grown during the p'an period to occupy a predominant place in the Indian tax structure.