Optimal Income Research Articles

Optimal Income Taxation with Composition Effects

AbstractProviding estimable sufficient statistics to give policy prescriptions has become a widespread approach, a well-known limitation of which is the endogeneity of sufficient statistics to the policy. Using optimal tax policy as our field of application, we highlight a new source of endogeneity. It arises under multidimensional heterogeneity, because optimal tax formulas are then expressed as functions of weighted means of sufficient statistics computed at the individual level and the weights are endogenous to the tax policy. We analytically show that ignoring these composition effects leads to underestimate the optimal linear tax and, under a restrictive set of assumptions, the optimal nonlinear tax as well. In the latter case, we use an improved tax perturbation approach to study composition effects without these assumptions. Numerical simulations on US data suggest the optimal tax rate may be underestimated by 6 p.p. for high incomes levels. We also relate our tax perturbation method to the first-order mechanism design method, both methods having hitherto been used separately to derive optimal tax schedules.

Pemberdayaan Peternak dalam Teknologi Produksi Pupuk Organik dan Biogas di Desa Gedong dan Desa Gemawang Kecamatan Ngadirojo, Kabupaten Wonogiri

Ngadirojo District was one of the centers of beef cattle business development in Wonogiri Regency. But the business done by farmers has not yet produced an optimal income. The purpose of this service activity was to empower farmers by increasing farmers' knowledge through the application of organic fertilizer-based fertilizer production technologies for beef cattle manure and biogas waste so as to increase the income of farmers. The method of this community service activity was through FGD (Focus Group Discussion), counseling, training and demonstration plots on technology for organic fertilizer and biogas production. The result of this activity was an increase in knowledge of farmers after attending counseling and training on organic fertilizer and biogas production technology. Farmers in Gemawang and Gedong Ngadirojo villages have benefited from the construction of biogas installations and the processing of livestock waste into organic fertilizer. The conclusion of this activity was the effort of empowerment through counseling activities and training on processing livestock waste into organic fertilizer and biogas showing success and running effectively as seen from the increasing knowledge of respondents after participating in counseling and training activities.

Are short‐term effects of pollution important for growth and optimal fiscal policy?

AbstractWe study optimal fiscal policy in a stock‐flow model of the environment within an endogenous growth framework, where some pollutants have a lasting impact on environmental quality which is restored through abatement expenditure, while others dissipate and hence, have a short‐term effect on the environment. All pollutants, however, affect the productivity of a public good negatively. Given that short‐term pollution, although it dissipates, is irreversible in this sense, a government cannot ignore its negative effects since this type of pollution lowers the productivity of all inputs. We find that a larger negative effect of short‐term pollutants as well as a higher congestion effect of private capital leads to corrective fiscal policies with higher optimal income tax and abatement expenditure rates, which have favorable growth consequences. Interestingly, we find that the rate of short‐term pollution does not affect optimal fiscal policy while that of the long‐term pollution does.

Revenue Potency of University of Mataram Through Cash Management

Universitas Mataram merupakan Perguruan Tinggi yang berstatus sebagai Badan Layanan Umum (BLU). Sebagai entitas BLU yang memiliki fleksibilitas dalam pengelolaan keuangan, Universitas Mataram diharapkan dapat mengoptimalkan potensi yang dimiliki untuk menghasilkan pendapatan. Salah satu potensi yang dapat menghasilkan pendapatan cukup besar adalah dengan memanfaatkan kas yang dimiliki. Penelitian ini bertujuan untuk mengidentifikasi potensi pendapatan yang dapat dihasilkan Universitas Mataram dengan melakukan manajemen kas. Penelitian ini dilakukan untuk memberikan alternatif investasi melalui manajemen kas BLU guna menghasilkan pendapatan yang lebih optimal. Investasi atas kas yang dimiliki dapat dilakukan sepanjang tidak menggangu kegiatan operasional universitas. Penelitian ini dilakukan dengan menentukan besarnya dana BLU yang belum digunakan (idle cash) untuk kegiatan operasional dan dapat digunakan untuk investasi. Hasil kajian ini menunjukkan bahwa potensi pendapatan Universitas Mataram dengan melakukan manajemen kas sebesar Rp 8.482.681.740,- per tahun. Rata-rata pendapatan dari penempatan kas di bank saat ini sebesar Rp 3.613.488.324,- sehingga masih ada potensi pendapatan yang belum termanfaatkan sebesar Rp4.869.193.416,- Potensi pendapatan ini diperoleh dengan memindahkan idle cash yang dimiliki dari bentuk giro menjadi deposito.

RELATIONSHIP OF THE GREENLAND HALIBUT STOCKS IN THE OKHOTSK SEA WITH ENVIRONMENTAL FACTORS

Dynamics of the greenland halibut biomass in the fishery districts of the Okhotsk Sea (or subzones) is considered. The biomass variation in the East-Sakhalin subzone has a significant (p < 0.05) negative correlation with the number of 3+ fish in other subzones, with the time lag of 3 years (r = –0.53) and 4 years (r = –0.49), that is interpreted as alternative distribution of the halibut recruitment from the common spawning area either to this district or other ones. From other hand, the recruits abundance in other districts is significantly and positively associated (r = 0.52, p < 0.05) with the index of zonal atmosphere transfer in January and with the index of meridional atmosphere transfer in March of the years of hatching. The recruitment dependence on the spawning stock could be explained by Beaverton-Holt equation with the residuals significantly and positively (r = 0.64, p = 0.03) related with the Arctic Oscillation index. Transport of the eggs, larvae and juveniles of greenland halibut from the spawning grounds at western Kamchatka to the western Okhotsk Sea is considered as the mechanism of its recruitment distribution between the districts in relation with atmospheric indices. The transport was simulated for 1993–2017 using the circulation model JCOPE2 as the movement of 250,000 artificial passive particles, imitating eggs and larvae, with water flows at the depth 40–50 m where their main aggregations are supposed. The particles were released in the area at western Kamchatka where the maximal concentration of spawning females occurred. Number of the particles reached the sections off eastern Sakhalin and their arrival times were computed, their pathways were tracked. The portion of particles released in December and reached northern Sakhalin within 150 days changed in significant positive correlation (r = 0.44, p < 0.05) with dynamics of the halibut stock in the East-Sakhalin subzone, with the time lag 6 years. Even closer correlation (r = 0.94, p < 0.05) could be found for the optimum income of the particles released in October or November in the general additive model of the stock. Using the model results for the recent years, the greenland halibut stock decreasing in the East-Sakhalin subzone is forecasted for the next 6 years.

Taxation of capital income in overlapping generations economies

AbstractWhether capital income should be taxed in overlapping generations economies is vividly discussed. It is shown that intergenerational lump‐sum taxes cannot implement the Golden Rule allocation when agents have private information on their earnings potential. Hence, the seminal Atkinson–Stiglitz result that optimal income taxation pre‐empts any role for indirect taxation cannot be interpreted to imply that capital income taxation (affecting intertemporal relative prices) should not be taxed. Specifically, capital income should unambiguously be taxed in small open economies, and the optimal tax rate depends inversely on the elasticity of total savings to disposable income and the after‐tax rate of return.

Two Reasons for not using Commodity Taxation in the Presence of an Optimal Income Tax

espanolEste trabajo presenta dos argumentos a favor de un uso exclusivo del impuesto sobre la renta con fines redistributivos. El primero es el hecho de que la mayoria de resultados sobre imposicion indirecta no lineal, tales como las formulas de Mirrlees para la eficiencia de Pareto, los resultados de Seade sobre tipos marginales zero en los extremos de la escala de renta, y la regla impositiva de Corlett y Hague solo resultan validos bajo el enfoque de segundo orden con la poco realista funcion de utilidad lineal en relacion a la capacidad individual. El segundo se centra en que, para que el teorema de Atkinson y Stiglitz resulte valido, es suficiente suponer que las preferencias son debilmente separables entre el consumo y la capacidad individual. Todo ello relega el uso de impuestos no lineales sobre el consumo al improbable escenario en que, aparte de preferencias no debilmente separables entre el consumo y la capacidad individual, existe una solucion al problema planteado bajo el enfoque de primer orden. EnglishThis paper presents two arguments in favor of the sole use of an income tax for redistribution purposes. The first is that most findings on nonlinear commodity taxation such as Mirrlees’s formulae for Pareto efficiency, Seade’s results on zero tax rates at the endpoints of the scale, and the Corlett-Hague tax rule only become valid under the second-order approach for the unrealistic class of utility functions that are affine with respect to ability. The second is that, for the Atkinson and Stiglitz theorem to hold, it suf- fices with assuming that preferences must be weakly separable in consumption and ability, a result that also remains valid with linear commodity taxation. All this relegates the use of nonlinear commodity taxes to the unlikely scenario in which, apart from non-weakly separable preferences between con- sumption and ability, there is a solution to the first-order approach problem.

Critical Review of the (Second Wave) Optimal Tax Theories

James Mirrlees (1971) launched the second wave of optimal tax models by suggesting a way to formalize the planner’s problem that deals explicitly with unobserved heterogeneity among taxpayers.So, in this paper optimal income taxation theories are subject of investigation following the classic paper in public finance by Mirrlees (1971). This provides analytical solutions for the second-best efficient tax system in presence of such an adverse selection. Until late 1990s, Mirrlees results were not closely connected to empirical tax studies and had little impact on tax policy recommendations. Next, the famous result Diamond-Mirrlees efficiency theorem Diamond-Mirrlees (1971a), Diamond-Mirrlees (1971b),has been reviewed. This theorem is important because it states that there should be no taxes on intermediate goods, and that private and public production should be based on same prices. Also, taxation should not violate efficiency of production. Solution to the Mankiw problem on the other hand states that small open economy, labor bears 100% of small capital income tax.

Economic dispatching strategy of distributed energy storage for deferring substation expansion in the distribution network with distributed generation and electric vehicle

Aiming at the problem that the traditional substation expansion method leads to low availability of transformers and distributed generations (DG), and considering the improvement of energy storage operation revenue to reduce the energy storage investment cost, an energy storage economic dispatch strategy for deferring substation expansion is proposed. The strategy takes the charge-discharge balance as the criterion, considers the system security constraints and energy storage operation constraints, and aims at maximizing the comprehensive income of system loss and arbitrage from energy storage operation, and establishes the economic operation model of energy storage, the energy storage power is calculated according to different peak-cutting values, and the operating income of corresponding energy storage power is calculated by substituting it into the economic operation model. Finally, the energy storage power corresponding to the optimal income is determined. Through the simulation and analysis of the IEEE33 bus distribution system, based on the proposed evaluation index, the results show that the economic dispatching strategy proposed in this paper can greatly increase the operating income of energy storage, reduce the equivalent annual investment cost of energy storage equipment by $54,930 compared with the substation expansion scheme, and increase the annual availability rate of transformers to 32.8%, the annual availability hours of distributed generations increased by 267 h.

A Differential Game-Based Approach for School-Enterprise Collaborative R&D Strategy on Digital Twin Technology

Digital twin (DT) technology is an effective way to realize intelligent manufacturing, which has been increasingly received attention in both academia and industry. Thus, it is rather necessary and significant to collaboratively accomplish the research and development (R&D) of DT technology (RDDT). To explore a school-enterprise collaborative R&D strategy on DT technology, this paper proposes a differential game-based approach to compute the optimal R&D effort levels and optimal incomes of both parties in the school-enterprise collaborative innovation (SECI) system. First, using Berman's continuous dynamic programming theory, the optimal R&D effort levels, the optimal incomes of both parties, and total optimal income in the SECI system are calculated in three cases: Nash non-cooperative game, Stackelberg master-slave game and cooperative game. Second, the equilibria of the three game cases are analyzed and compared. Finally, a numerical example is used to verify the validity of the conclusion, and we find that the optimal benefit of two parties in cooperative game are significantly better than those of Nash non-cooperative game and Stackelberg master-slave game, which effectively demonstrates the superiority of school-enterprise collaborative R&D on DT technology.

Optimal Income Taxation with Labor Supply Responses at Two Margins: When is an Earned Income Tax Credit Optimal?

This paper studies optimal non-linear income taxation in an empirically plausible model with labor supply responses at the intensive (hours, effort) and the extensive (participation) margin. In this model, redistributive taxation gives rise to a previously neglected trade-off between two aspects of effciency: To reduce the deadweight loss from distortions at the extensive margin, the social planner has to increase distortions at the intensive margin and vice versa. Due to this trade-off, minimizing the overall deadweight loss requires to distort labor supply by low-skill workers upwards at both margins. Building on these insights, the paper is the first to provide conditions under which social welfare is maximized by an Earned Income Tax Credit with negative marginal taxes and negative participation taxes at low income levels.

Gini and Optimal Income Taxation by Rank

We solve the non-linear income tax program for a rank-dependent social welfare function a la Yaari, expressing the trade-off between size and inequality using the Gini or related families of positional indices. The key idea is that when agents optimize and absent bunching, ranks in the actual and optimal allocations become an invariant dimension. This allows us to obtain optimal marginal tax rates as a function of ranks, and numerically illustrate the relationship between ranks and taxes. For singles without children, the actual US tax schedule seems to indicate a distaste for differences in the upper part of the distribution.

A Cooperative Game Theory-Based Algorithm for Overlapping Community Detection

Community detection is of great significance and has more guiding for network analysis which has attract a lot of attention and is widely used in many areas. The process of community formation is modeled as a game in this paper, nodes in networks are taken as players, and communities are regarded as coalitions. An overlapping community detection algorithm is presented based on cooperative game theory. Furthermore, an edge weight computation is proposed for calculating Shapley value of node and coalition, and a strategy of optimal income for the individual is designed. It is for each player to choose its best coalition to stay or leave during the game process. Through choosing coalitions which can improve the value of their characteristic function, coalitions can be merged to avoid small size coalitions. It does not need any prior information about the number and the size of communities and the overlapping community structure is stable at the end of the algorithm. The experimental results both on synthetic and real networks demonstrate the good performance of the proposed method. It can detect overlapping communities more accurately.

Pro-Rich Inflation and Optimal Income Taxation

Pro-Rich Inflation and Optimal Income Taxation

The Equal-Sacrifice Social Welfare Function with an Application to Optimal Income Taxation

We propose and axiomatically characterize a family of welfare criteria that prioritize individuals making larger sacrifices. By combining efficiency with a concern for equality of sacrifice, our criteria avoid serious shortcomings of utilitarianism. We illustrate our results within the Mirrleesian optimal taxation framework. Our simulated equal-sacrifice optimal tax schedule for the US has marginal tax rates in line with the US tax system and about 20 percentage points lower than the utilitarian recommendation.

Analisis potensi penerimaan retribusi pelayanan pasar pada PD. Pasar di Kota Manado

Market service retribution is one Local Own-Source Revenue that used to financing regional expenditure. The aim of this study is to understand the income potential of the market service retribution in Manado City in period of 2017 to 2018. This study uses descriptive qualitative as method of analysis. The result shows that potential market retribution in period of 2017 to 2018 had increased. The greatest market potential service retribution in 2018 found in Bersehati Market, Pinasungkulan Market, and “Shopping Center”. The income potential has increase on Bersehati Market for about Rp 4,186,080,000 which caused by seller increasing as same as Pinasungkulan Market and Shopping Centers with income potential respectively about Rp 792,000,000 and Rp 612,720,000. The market with the smallest income potential is called “Jalan Roda” with value of Rp. 149,040,000 with 69 selling sites. Overall, optimal income potential of 2018 for retribution of market service increase from Rp 6,100,920,000 to Rp. 6,551,280,000 accompany by seller increase.

Understanding Different Approaches to Benefit‐Based Taxation

AbstractThe normative principle of benefit‐based taxation has exerted substantial influence on many areas of public finance, but it has been largely set aside in the modern theoretical approach to optimal income taxation, where welfarist objectives dominate. A prerequisite for that gap to close is the clarification of what benefit‐based income taxation would mean, specifically in a first‐best setting. This paper seeks to provide clear, accessible descriptions and novel graphical representations of four major approaches to first‐best benefit‐based taxation, explain how these approaches relate to each other, and apply them within the classical benefit‐based framework for optimal income taxation of Smith (1776).

THE SOCIOCULTURAL STRESS PROCESS MODEL APPLIED TO LONG-DISTANCE CAREGIVING

This study investigated the impact of LDC on mental health utilizing the Sociocultural Stress Process Model as a conceptual framework. A path analytic model tested the impact of caregiving stressors (i.e. distance, frequencies of visits, hours spent helping, burden) and sociocultural values (i.e. familialism) on LDCs’ mental health outcomes (i.e. depression, anxiety), and resources (i.e. coping strategies, social support) which can mediate the association between stressors and mental health outcomes while controlling for socio-demographics. Results show that resources did not mediate the effects of stressors on the mental health outcomes. However, both higher depression and anxiety were associated with living closer to the care recipient (CR), less frequent visits, higher burden, being younger, being female, and less optimal income adequacy. In addition, higher depression was associated with lower use of coping strategies and higher education. Higher anxiety was also associated with lower levels of social support and higher familialism.

Optimal income taxation when couples have endogenous bargaining power

This study examines the optimal income taxation for a two-earner household, where the couple bargains over their private goods consumption and time allocation between work and leisure. In the model, bargaining power is determined endogenously by the income gap between the two earners. Conventional studies have shown that the higher income tax rate should be imposed on the individual with the smaller wage elasticity, typically the individual with the higher productivity. In contrast to conventional argument, this study shows that the optimal tax rate on the household member with the higher productivity is lower than that of the individual with the lower productivity if the required tax revenue is relatively small and the influence of the gender income gap on the power balance of the couple is moderate. This is because such a tax structure encourages the labor supply of the individual with the higher productivity to mitigate the decrease in the household’s consumption induced by income taxation.

Understanding Different Approaches to Benefit-Based Taxation

The normative principle of benefit-based taxation has exerted substantial influence on many areas of public finance, but it has been largely set aside in the modern theoretical approach to optimal income taxation, where welfarist objectives dominate. A prerequisite for that gap to close is the clarification of what benefit-based income taxation would mean, specifically in a first-best setting. This paper seeks to provide clear, accessible descriptions and novel graphical representations of four major approaches to first-best benefit-based taxation, explain how these approaches relate to each other, and apply them within the Classical Benefit-Based framework for optimal income taxation of Smith (1776). Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.