Implicit Tax Research Articles

Distributional and revenue effects of a tax shift from labor to property

Contrary to frequent recommendations of the public finance literature and international institutions, a persistently high tax wedge on labor is observed in Europe. Simultaneously, the scope for shifting taxes to more growth-friendly revenue sources appears underused. This motivates our simulation of a tax shift from labor to property for Germany, a country where property tax revenues are particularly low and the tax wedge on labor income is among the highest in industrialized countries. We simulate a reform where property is no longer taxed by its (often) outdated cadastral value but by its market value, using the additional revenue to reduce social insurance contributions (SIC). To make such a simulation possible, we match property-related information with the input data of the tax-benefit microsimulation model EUROMOD. We find a considerable increase in property tax revenues, allowing to reduce the implicit tax rate on labor from 37.2 to 36.5%. Distributive effects tend to be modest and depend on the design of the SIC reduction. Overall, our results suggest that more households would gain than lose from the tax shift, with gainers mostly situated in the middle of the income distribution.

Unilaterally removing implicit subsidies for maritime fuels

Many academics and policymakers agree that implicit tax subsidies for maritime fuels — which are currently granted around the world — are inefficient, but that their abolishment requires a unanimous international agreement. Such an agreement is deemed indispensable because any unilateral action would be impossible due to massive tax competition in this industry, competitiveness effects and the legal limits on regulating an industry operating mostly in international waters, thus outside of any state’s jurisdiction. However, an international agreement to solve these problems has proven impossible to reach, thus resulting in the conservation of the status quo. To break this deadlock, we propose a mechanism whereby a small coalition of countries, to start with, can abolish these implicit tax subsidies even in the absence of an international agreement. This incentive-compatible scheme solves the above-mentioned issues. The mechanism is furthermore designed to avoid locking in a sub-global scheme. Instead, it has the potential to contribute to unlocking the gridlock in negotiations over a global agreement on this matter.

The Affordable Care Act and the New Economics of Part-Time Work

The Affordable Care Act (ACA) imposes several types of incentives that will affect work schedules. The largest of them are (1) an explicit penalty on employers who do not offer coverage to their full-time employees; (2) an implicit tax on full-time employment, stemming from the fact that full-time employees at employers that offer affordable coverage are ineligible to receive subsidies on the law's new health insurance exchanges; and (3) an implicit tax on earnings, stemming from the provisions of the law that give lower subsidies to those with higher incomes. The labor market will likely adjust to the various new costs by reducing weekly employment per person by about 3%. The tax incentives will push some workers to work more hours per week (for the weeks that they are on a payroll), and others to work fewer. According to the model presented in this paper, the ACA's incentives and ultimately its behavioral effects will vary substantially across groups, with the elderly experiencing hardly any new incentives and female workers being most likely to cut their work schedules to 29 hours per week.

Optimal Income Taxation in Unionized Labor Markets

This paper extends the Diamond (1980) model with labor unions to study optimal income taxation and to analyze whether unions can be desirable for income redistribution. Unions bargain with firms over wages in each sector and firms unilaterally determine employment. Unions raise the efficiency costs of income redistribution, because unemployment benefits and income taxes raise wage demands and thereby generate involuntary unemployment. Optimal unemployment benefits and optimal income taxes are lower in unionized labor markets. We show that unions are socially desirable only if they represent (low-income) workers whose participation is subsidized on a net basis. By creating implicit taxes on work, unions alleviate the labor-market distortions caused by income taxation. Numerical simulations demonstrate that optimal taxes and transfers are much less redistributive in unionized labor markets than in competitive labor markets.

An Evaluation of the Scale of Undeclared Work in the European Union and Its Structural Determinants: Estimates Using the Labour Input Method

An Evaluation of the Scale of Undeclared Work in the European Union and Its Structural Determinants: Estimates Using the Labour Input Method

OPTIMAL FISCAL POLICY WITH LAND FINANCING IN CHINA

This paper examines China's optimal fiscal policy in a general equilibrium model, in which the government finances its budget through both a special instrument, an implicit tax on the residential land, and a typical conventional instrument, the value-added tax (VAT). By solving a Ramsey problem, we find that (i) the optimal policy suggests a much lower land tax rate than the existing rate in China, and (ii) a substantial part of debt stabilization should come through an adjustment in the VAT rate, instead of relying on land financing. Switching from the existing policy to the Ramsey policy generates significant welfare gains.

세율변경 전후 내재적 조세의 변화

세율변경 전후 내재적 조세의 변화

The Economic Implications of Housing Supply

In this essay, we review the basic economics of housing supply and the functioning of US housing markets to better understand the distribution of home prices, household wealth, and the spatial distribution of people across markets. We employ a cost-based approach to gauge whether a housing market is delivering appropriately priced units. Specifically, we investigate whether market prices (roughly) equal the costs of producing the housing unit. If so, the market is well-functioning in the sense that it efficiently delivers housing units at their production cost. The gap between price and production cost can be understood as a regulatory tax. The available evidence suggests, but does not definitively prove, that the implicit tax on development created by housing regulations is higher in many areas than any reasonable negative externalities associated with new construction. We discuss two main effects of developments in housing prices: on patterns of household wealth and on the incentives for relocation to high-wage, high-productivity areas. Finally, we turn to policy implications.

Wie soll die EZB aus ihrer unkonventionellen Geldpolitik aussteigen?

As economic conditions improve in the euro area, the European Central Bank (ECB) has to decide how to sequence the normalisation of monetary policy. Phasing out asset purchases first would mainly increase long-term rates and help to mitigate some of the most negative side effects of the extremely expansionary monetary policy, such as misallocations in asset markets. In contrast, starting with an increase of the rate on the deposit facility would reduce the implicit tax on banks’ liquidity holdings at the ECB, which could improve financial stability. Forward guidance and clear communication from the ECB are crucial to safeguarding a smooth transition back to a more conventional monetary policy.

Implicit Corporate Taxes and Income Shifting

Implicit tax theory predicts that as capital moves to tax-favored investments, the expected pretax returns on those investments decrease. At the global level, this should create a positive relation between country-level tax rates and firm-level pretax returns. However, theory in income-shifting predicts reported pretax returns are inversely related to tax rates, as firms shift profits into lower-tax countries. We analytically model these two theories and empirically test our predictions in two samples of European firms: single-country firms and affiliates of multinational firms. In the sample of single-country firms, we find robust evidence of country-wide implicit taxes, but that this effect is driven by closed economies (non-EU countries). In the sample of multinational firms, we find that the effects of income shifting overwhelm the effects of implicit taxes. Our results imply that certain measures of income shifting estimated using reported profits can be understated when the effects of implicit taxes are ignored, but these effects are less problematic when the research setting includes mostly open economies. Our granular setting of multiple countries and affiliate level data helps explain prior research that finds decreasing corporate implicit tax effects over time, particularly for multinationals.

Tax penalties on fluctuating incomes: estimates from longitudinal data

Progressive personal income taxes can cause individuals with fluctuating incomes to pay more taxes over time than individuals with constant incomes of the same average value. The implicit tax penalty violates principles of equity and may harm efficiency by discouraging risk-taking activities, such as entrepreneurship. This paper uses longitudinal data to estimate the tax penalties in six panels of Canadian data from 1993 to 2010. The effects of various income averaging policies for mitigating tax penalties are then examined.

ECONOMIC EVALUATION FOR INPUTS AND OUTPUTS OF THE MOST IMPORTANT CEREAL CROPS IN EGYPT

the study aims to Search evolution of the Indicators to productivity and economic for Crops of wheat, maize, rice during the period (2000-2014) And analysis the effect of government intervention in production for the period (2012-2014)،The results indicate that average annual to cultivated area each them estimated at 2,9، 1,8، 1,5 million Feddan, respectively, As it turns out it increases annually by about 72,35، 32,05 thousand Feddan, represent about 2,50, 1,24 percent of the annual average area of wheat and maize, And that the area planted with rice characterized by relative stability, and this may be due to government intervention in determining the cultivated area. The annual average productivity per Feddan for study crops , Wheat, maize, rice, estimated at about 2,6, 3,38، 4 tons each, respectively, It was found that all a study crops was characterized relative stability, Annual average of total production of a study crops have been estimated about 7,7, 6,1،5,8 million tons, each for which respectively, the annual average for Farm price of study crops have been estimated around 1579، 1237،1356pounds per ton, respectively,It was found that is increasing annually about 156، 89، 121 pounds per ton represents about 9,86، 7,23، 8,94 % the annual average farm price. The total return amounted to about 4242، 4246، 5386 pounds per Feddan It increases annually by about 553,7 ،466,95 ، 539,2 pounds Represents about 13,05,11، 10,01 percent of the annual average from total income, the average total cost was around 290, 2881، 3305 pounds per Feddan, and is growing annually at about 282,4، 270,8 ، 292,7 pounds per Feddan represents about 9,71 ، 9,40 ،8,86 % of average total costs the average net return per Feddan was around 1333، 1371,2081 pounds and is growing annually at about 271,3, 196,8، 243,3 pounds,represents about 20,35، 14,35, 11,69 percent of the annual average net return. Nominal Protection Coefficient estimate for wheat crop was about 1, 07, indicating that the state provides support to producers of wheat, while the Maize and rice crops, has been estimated 0, 64 ، 0,43 indicating that producers bear the implicit taxes by the state٠Nominal Protection Coefficient estimate for Production requirements to the three crops valued at less than the one undivided, which indicates that the government provides clear support for imported inputs, which estimated at 0, 26, 0, 24 ، 0,27 % from the value of inputs. Effective Protection Coefficient for Wheat ، maiz, rice, crops estimated at 1,15, 0,61, 0,41 respectively, which indicates that there is effective protection to producers of wheat,While maize and rice producers bear implicit taxes, Comparative advantage coefficient estimated at 0,67, 0,56, 0,24% which indicates a comparative advantage to Egypt in the three crops production.

Assessing the College Financial Aid Work Penalty

ABSTRACTWorking has become commonplace among college students in the United States; however, this activity can have unexpected financial consequences. Federal formulas implicitly tax the amount of financial aid some students are eligible to receive by as much as 50 cents for each marginal dollar of income. In this article, I document this college financial aid “work penalty” and discuss the related incentives for some college students to reduce their income. Using data from a national sample of financially independent college students in the United States, I did not find evidence to suggest that students meaningfully reduce earnings because of implicit taxes. Lack of knowledge, abstruse formulas, and the timing of aid receipt likely limit responses. The reduction in aid has the potential to burden low-income students who need to both work and receive financial aid to afford college expenses.

Using Spatial Distribution of Outlets to Estimate Gambling Incidence

The paper proposes a simple and innovative methodology for measuring the incidence of gambling expenditure in countries for which household survey data is unavailable or unreliable. A first application of this methodology is presented by merging data on the geographical location of gambling outlets, together with residents’ socio-economic and demographic characteristics around that location across all of the 1,600 statistical areas in Israel. It was found that the Israel National Lottery (Lotto) and Toto tend to set up significantly more sales points in disadvantaged neighborhoods after controlling for standard list of factors such as population size and composition. The Suit Index is calculated based on the spatial estimation results and yields a measure of -0.42, which implies that the implicit tax associated with gambling is highly regressive.

Global progress and backsliding on gasoline taxes and subsidies

To reduce greenhouse gas emissions in the coming decades, many governments will have to reform their energy policies. These policies are difficult to measure with any precision. As a result, it is unclear whether progress has been made towards important energy policy reforms, such as reducing fossil fuel subsidies. We use new data to measure net taxes and subsidies for gasoline in almost all countries at the monthly level and find evidence of both progress and backsliding. From 2003 to 2015, gasoline taxes rose in 83 states but fell in 46 states. During the same period, the global mean gasoline tax fell by 13.3% due to faster consumption growth in countries with lower taxes. Our results suggest that global progress towards fossil fuel price reform has been mixed, and that many governments are failing to exploit one of the most cost-effective policy tools for limiting greenhouse gas emissions. Reforms of energy markets are necessary to face the low carbon transition but are problematic to measure. New data evaluate implicit taxes and subsidies for gasoline in almost all countries at monthly intervals showing mixed results that highlight the difficulty in implementing effective policy tools.

Is Uncle Sam Inducing the Elderly to Retire?

Executive SummaryMany, if not most, baby boomers appear at risk of suffering a major decline in their living standard in retirement. With federal and state government finances far too encumbered to significantly raise Social Security, Medicare, and Medicaid benefits, boomers must look to their own devices to rescue their retirements, namely, working harder and longer. However, the incentive of boomers to earn more is significantly limited by a plethora of explicit federal and state taxes and implicit taxes arising from the loss of federal and state benefits as one earns more. Of particular concern is Medicaid and Social Security’s complex earnings test and clawback of disability benefits. This study measures the work disincentives confronting those age 50 to 79 from the entire array of explicit and implicit fiscal work disincentives. Specifically, the paper runs older respondents in the Federal Reserve’s 2013 Survey of Consumer Finances through The Fiscal Analyzer—a software tool designed, in part, to cal...

Government Funding Privileges in European Financial Law Making Public Debt Everybody's Favourite?

Since the global financial crisis of 2008 European authorities have set out to strengthen financial governance in order to create a more stable and resilient financial system. As discussed in this paper, the new and updated EU legislation addressed at a wide array of financial markets and institutions also significantly broadened the scope of the existing preferential regulatory treatment of sovereign bonds and introduced new funding privileges for governments. The many regulatory incentives for investors to buy and hold (domestic) government debt facilitate public debt management, at the cost of crowding out private sector funding and raising financial stability concerns every time the government faces distress. Moreover, a privileged access to capital markets reduces market discipline and may lead to moral hazard on the part of sovereigns. The growing scope of these government funding privileges in EU financial law may be interpreted in three (complementary) ways: as a revival of financial repression in a modern prudential guise to reduce the burden of high public debt, as a return to the traditional close relationship between the government and the financial sector so as to align mutual interests in fiscal and financial stability, or as a way to increase explicit and implicit taxes on finance and recoup public revenues lost during the financial crisis. The preferential treatment of sovereign exposures and governments’ market access is found in a growing body of EU financial law. Regulatory efforts to reduce it would have to be coordinated at the international level, take account of the financial structure and allow for a (long) period of transition to avoid market disruption.

Narrow and Broad Perspectives on Trade Policy and Trade Costs: How to Facilitate Trade in Madagascar

AbstractMadagascar is a high trade cost and relatively closed economy. The WTO's latest Trade Policy Review (TPR) for the country, like all TPRs, concentrates on border sources of trade costs, those induced by trade policy instruments such as tariffs or implicit taxes imposed by slow and costly customs procedures or trade documentation requirements. This narrow focus for trade policy and facilitation misses the substantive within‐and‐beyond‐the‐border sources of trade costs experienced by traders in a country like Madagascar. This paper illustrates the nature and significance of a narrow and broad view of trade costs and trade facilitation for this relatively remote and ‘internally land‐locked’ economy.

The Effect of Benefit Reductions on the Retirement Age: The Heterogeneous Response of Manual and Non‐Manual Workers

I estimate the effect of benefit reductions on the timing of retirement. The introduction of actuarial adjustments in the German public pension system serves as a source of exogenous variation to estimate discrete time transition rates into retirement for individuals of age 60–66. Responses to benefit reductions are elaborated separately for manual and non‐manual workers. On average, individuals postpone retirement by 13.2 months if pension benefits are reduced by 3.6 percent for each year of early retirement. This result is in line with the previous quasi‐experimental literature and suggests that people respond to the incentive of reducing the implicit tax on further periods of work. However, among men the response is about 50 percent lower for manual workers compared to non‐manual workers. Surprisingly, this does not necessarily indicate that retirement incomes of manual workers deteriorate. The explanation is that disability pensions are available at age 63—without benefit reductions.

Assessing the synergistic reduction effects of different energy environmental taxes: the case of China

Imposing any tax among carbon tax, sulfur tax and nitrogen tax on fossil fuels will also reduce the other two air pollutants. Neglecting the synergistic effect of each energy environmental tax and levying carbon tax, sulfur tax and nitrogen tax at the same time will overestimate the abatement cost of air emissions. This study adopts a partial equilibrium model which uses linear demand and supply curves to illustrate the emission reductions in carbon tax, sulfur tax and nitrogen tax. The synergistic reduction effects of CO2, SO2 and NO x are firstly evaluated under the implicit tax scenario of resource tax and consumption tax on fossil fuels. Then it is compared with the synergistic reduction effects of CO2, SO2 and NO x under different explicit tax scenarios of increasing tax rate on carbon tax, sulfur tax and nitrogen tax. If the synergistic reduction effect of explicit environmental taxes is better, this research aims to find one kind of environmental tax among carbon tax, sulfur tax and nitrogen tax with the best synergistic reduction effect and to provide a decision support for the policy makers of energy environmental taxes. The results indicate that explicit environmental taxes have better synergistic reduction effects compared with the current implicit environmental taxes. And explicit sulfur tax can lead to the largest synergistic reduction effects of CO2, SO2 and NO x . Therefore, the policy makers of energy environmental taxes could consider adopting the explicit sulfur tax to reduce various environmental air emissions at the largest amount.