Changes In Income Tax Rates Research Articles

Tax Avoidance

By using a data set of professional basketball players' free agent contracts from the National Basketball Association (NBA) between the 2001-2002 and 2007-2008 seasons, which has rich data on worker productivity, the author is able to identify the effect that changes in income tax rates have on the labor migration decisions of NBA free agents. After controlling for other observable characteristics of teams, cities, and states, the author finds that an increase in the marginal income tax rate faced by NBA basketball players that play for a given team leads to a decrease in the average skill of the NBA free agents that migrate to that team.

Unemployment, Government Spending and the Laffer Effect*

AbstractThe paper studies the effects of income tax rate changes in a general equilibrium model with frictional unemployment. Laffer curve effects, by which a tax rate reduction may increase the level of government spending or its share in output, are shown to be possible under certain conditions. These are the presence of unemployment benefit payments, government budget balance through fiscal spending adjustment and limited quantitative importance of labour reallocation costs. Endogenous government spending acts as a fiscal accelerator if the fiscal burden of unemployment benefit payments is large, but reduces the employment effects of tax rate cuts if it is low.

Do Voters Reward and Punish Governments for Changes in Income Taxes?

This article examines whether governments experience electoral sanctions for changes in income tax rates. The article asks two questions. First, do governments gain votes after lowering taxes and lose votes after raising taxes? Second, is this effect conditional upon the ideology of the government, with right‐wing governments being particularly sensitive to changes in tax rates? An analysis of national elections between 1990 and 2006 in 19 countries finds evidence that governing parties that raise (lower) taxes lose (gain) votes in subsequent elections. Further analyses are suggestive that right‐wing incumbents are more strongly affected by changes in basic income tax levels than left‐wing and centrist governing parties. However, these findings hold only when measuring changes in income tax brackets that broadly affect the electorate, suggesting a certain degree of economic rationality.

The Taxable Income Elasticity of High-Income Taxpayers: Evidence from a Long Panel

This paper employs a long panel of income tax returns to examine trends in reported by the wealthy taxpayers over a number of tax reforms spanning the years 1979 through 1995. During this period, a number of tax reforms were enacted, including the Economic Recovery Tax Act of 1981, the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1990, and the Omnibus Budget Reconciliation Act of 1993. This paper focuses on how the top one percent of the tax filing population responded to changes in income tax rates in these reforms.

PRODUCTIVE GOVERNMENT SPENDING, PATTERNS OF SPECIALIZATION AND ECONOMIC GROWTH IN A SMALL OPEN ECONOMY

Constructing a two-sector small open endogenous growth model with productive government spending, this paper examines patterns of specialization and the growth effects of fiscal policy. It is shown in this model that a change in income tax rate can cause a change in an equilibrium pattern of specialization. Because of this property, the relationship between the tax rate and the growth rate yields either a humped shape or a two-humped shape, depending on world commodity prices. We also show that the growth maximizing tax rate is not necessarily equal to the tax rate that maximizes the level of social welfare.

Managing discretionary accruals in response to reductions in corporate tax rates in Canada, Malaysia and Singapore

The accounting literature provides much evidence of incentives to manage earnings ( Healy 1985, Jones 1991, Moses 1987). Evidence on using discretionary current accruals as an earnings management tool to benefit from income tax rate changes in the USA is given in Guenther (1994). The present study provides empirical evidence on the management of discretionary current accruals by nonmanufacturing corporations in Canada, Malaysia and Singapore in response to changes in the statutory corporate income tax rates in these countries. It also tests competing hypotheses relating to managing discretionary current accruals, specifically the incentives provided by the positive accounting variables of political costs and debt covenants as proxied by firm size and firm leverage, respectively. Our analysis provides evidence on managing discretionary current accruals by companies in Canada and Singapore similar to that found by Guenther (1994) for the USA. The weaker Malaysian results can be attributed to cultural factors.

The Interaction of Corporate and Government Financing in General Equilibrium

This article develops a general equilibrium model for analyzing the in teraction of corporate financial and production decisions, consumers' behavior, and government financing. The authors use the model to inv estigate how changes in income tax rates and government debt policy a ffect production, interest rates, and consumer welfare. They also sho w how changes in the different tax rates affect other tax rates in ge neral equilibrium. Copyright 1988 by the University of Chicago.

Effects of Selected Tax Policies on Management and Growth of A Catfish Enterprise

AbstractA multiperiod programming model was used to simulate the effects of lower marginal income tax rates, the soil and water conservation deduction, and the cash tax accounting option on firm growth for a “representative” farm operating in the Alabama Black Belt region. Results show the lowered marginal income tax rates associated with the Economic Recovery Tax Act (ERTA) of 1981 provide a positive growth stimulus to the modeled firm as measured by accumulated net worth over a 10-year planning horizon. The soil and water conservation deduction in general provides greater tax relief to the modeled firm than either the ERTA income tax rate changes or the cash tax accounting provision. Important complementary and substitute relationships were found to exist between marginal income tax rates and the various tax provisions studied, implying care must be exercised when attempting to evaluate the impact on farm firms of changes in tax policy.