Personal Income Tax Base Research Articles

Labor share as an "automatic stabilizer" of income inequality

We provide a new and unexplored explanation of the relationship between the functional and personal distribution of income. By proposing a simple theoretical framework, we show that, in the noncomprehensive personal income tax (PIT) hypothesis (i.e., when some or all capital income items are excluded from the PIT base), the correlation between disposable and market income inequality depends on the labor share level, which may influence the overall effectiveness of the tax-benefit system in addition to the PIT progressivity. We test our hypothesis using panel data on 33 OECD countries from 2000 to 2017 and find that a 10-pp increase in labor share is related to a 0.06 reduction in the correlation between market and disposable income inequality. This significant result obtained after controlling for country and year fixed effects, country-specific linear trends, and several confounders capturing the characteristics of the tax-benefit system suggests that labor share may act as an "automatic stabilizer" of market income inequality. Relevant implications for tax policy concern the role of the PIT's base for the public budget's overall redistributive effect.

Quantifying the Redistributive Effect of the Erosion of the Italian Personal Income Tax Base: A Microsimulation Exercise

In recent years several sources of income have been excluded from the Italian Personal Income Tax (PIT) base and subject to alternative proportional systems or totally exempt from taxation. These changes have contributed to making PIT even more selective, accentuating vertical equity issues that have accompanied it since it was introduced in 1974. The aim of this paper is to calculate the redistributive effect following the erosion of the PIT base and the contribution of this phenomenon in determing the redistributive power of the Italian tax system, as well as the distribution of the fiscal benefits and burdens by deciles of income under the alternative tax rules considered. Using a static microsimulation model, the paper compares various versions of the tax system within a counterfactual logic: on the one hand, the existing legislation as of 2014 consisting of PIT and those incomes subject to substitute taxes or tax-free in this study; on the other hand, an hypothetical legislation which takes as a reference point the Comprehensive Income Tax (CIT) scheme and includes in its base all incomes replicated. The results demonstrate that the erosion of the PIT base has reduced the redistributive effect and the progressive nature of the Italian tax system.

The elasticity of personal income: evidence from survey data

This paper uses income survey and tax burden data for Italy, in order to estimate the elasticity of personal income to taxation. The estimated elasticity is lower with a broad definition of personal income. Given the current tax structure and the system of tax expenditures, income shifting and tax avoidance behaviour are an important determinant of the personal income tax base. The estimated regression models also show, that labour market developments have contributed to decrease inequality in the 2000–2012 sample period. The elasticity estimates are employed to simulate the effects of the “80 euro tax bonus”.

ปัจจัยที่มีผลต่อการตัดสินใจเลือกลงทุนในกองทุนรวมเพื่อการเลี้ยงชีพ หรือกองทุนรวมหุ้นระยะยาวของพนักงานธนาคารกรุงเทพ จำกัด (มหาชน) เขตภาคกลาง (Factors Affecting Decision Making to Invest in the Retirement Mutual Fund or Long Term Equity Fund of the Bangkok Bank Public Company Limited Employees in the Central Region)

Thai Abstract: การวจยครง น มวตถประสงคเพอศกษา 1) ระดบการตดสนใจและพฤตกรรมการลงทนในกองทนรวมเพอการเลยงชพหรอกองทนรวมหนระยะยาวของ บลจ.บวหลวงของพนกงานธนาคารกรงเทพ จากด (มหาชน) เขตภาคกลาง และ 2)เปรยบเทยบปจ จยสวนบคคลทมผลตอการตดสนใจเลอกลงทนในกองทนรวมเพอการเลยงชพ กลมตวอยางทใชในการวจยครง น คอ พนกงานธนาคารกรงเทพ จา กด (มหาชน) ในเขตภาคกลาง ทเคยลงทนในกองทนรวมเพอการเลยงชพ(RMF) จานวน 360 คน โดยใชแบบสอบถามเปนเครองมอในการวจย ขอมลทไดจากการตอบแบบสอบถามของประชากรนามาประมวลผลดวยโปรแกรมคอมพวเตอรสา เรจรป สา หรบคาสถตทใชในการวเคราะหขอมลประกอบดวยคาสถตรอยละ คาเฉลย คาเบยงเบนมาตรฐาน คา t-test one-way ANOVA การเปรยบเทยบความแตกตางเปนรายคดวยวธ LSD และ Correlation โดยกา หนดคานยสา คญทางสถตทระดบ .05 ผลการวจยพบวา การตดสนใจลงทนดานภาพรวมกลมตวอยางมความคดเหนอยในระดบปานกลาง (คาเฉลย 3.48) มพฤตกรรมการลงทนในภาพรวมอยในระดบปานกลาง (คาเฉลย 3.37) สาหรบปจจยสวนบคคลไดแก เพศ อาย สถานภาพการสมรส ระดบการศกษา รายไดตอเดอน และฐานภาษเงนไดบคคลธรรมดาทเสยสงสดตางกนมระดบการตดสนใจเลอกลงทนในกองทนรวมเพอการเลยงชพ หรอกองทนรวมหนระยะยาว ของ บลจ.บวหลวง ของพนกงานธนาคารกรงเทพ จากด (มหาชน) เขตภาคกลาง แตกตางกน English Abstract: The objectives of the research were 1) to study level of decision making and investment behavior in Retirement Mutual Fund or Long Term Equity Fund of Bangkok Bank Public Company Limited employees in central region and 2) to compare personal factors affecting the decision making to invest in Retirement Mutual Fund or Long Term Equity Fund of Bangkok Bank Public Company Limited employees in central region. The samples used in this study were 360 employees of Bangkok Bank Public Company Limited in the central region who had invested in the Retirement Mutual Fund (RMF) by using a questionnaire as a tool for research. The data was processed by a computer program. The statistics used to analyze data were the percentage, mean, standard deviation, t-test, one-way ANOVA, LSD and Correlation with the statistical significance level of 05. The research found that the decision making in overall investment, the samples had opinion at moderate level (average 3.48) and they also had overall investment behavior at moderate level (mean 3.37). For personal factors, the samples that were different in gender, age, marital status, educational level, monthly income and the highest personal income tax base, had level of decision making to invest in Retirement Mutual Fund or Long Term Equity Fund in Bualuang Asset Management Company Limited of the Bangkok Bank Public Company Limited employees in the central region differently.

A Tax-Benefit Microsimulation Model for Italy: A Partial Evaluation of Fiscal Consolidation in the Period 2011-2014

This paper develops a tax-benefit microsimulation model for the Italian economy to evaluate the impact of fiscal policy measures on household income. The simulations are performed on a dataset obtained from the matching of IT-SILC 2011 with HBS 2010, SHIW 2010 and IT-SILC 2008 to integrate income variables with consumption, financial assets and the tax base of property tax. The model quantifies the impact (the so-called first round effects) on household income of a set of fiscal policies implemented in Italy in the period 2011-2014: the increase in the ordinary VAT rate, the reintroduction of the property tax on the main home, the increase in the earnings tax credit, the 80-euro tax credit for employees, the modification of the personal income tax base and finally the rise of the tax rate on yields of deposits. We assess also the effects of changes of regional income taxes, despite not being part, strictly speaking, of the consolidation package. As a whole, the simulated average change in disposable income is negative.

고령화 시대를 대비한 개인소득세원 확대

이 논문은 빠르게 고령화되고 있는 한국의 인구구조와 이에 수반되는 복지지출 증가의 재원 조성을 위해 증세가 불가피함을 전제로 조세구조 개혁의 방향과 우선순위를 검토했다. 한국의 경우 조세부담 수준은 선진국 수준에 근접해가고 있는 반면 조세구조는 여전히 복잡하고 다양한 개도국적 특징을 가지고 있다. 조세정보가 충분하지 않고 납세의식이 낮아 조세회피와 저항이 크고 소득과세에서 개인소득세의 비중이 낮다. 또한 체계적인 개혁 없이 단기적 필요에 따라 세제가 개편되어 왔기 때문에 부문이나 상품 간 세율 격차에 따른 왜곡효과가 크다. 따라서 성급한 세율 인상보다 복잡한 과세체계를 정비하고 협소한 과세베이스를 넓히는 일이 조세개혁의 기본 방향이다. 이 논문은 안정적이고 효율적인 세수확보 및 조세의 재분배 효과를 감안한다면 개인소득세원의 확대가 우선 과제임을 강조했으며, 과세베이스를 넓히기 위해 조세지출을 정비하고 조세회피 및 비공식 부문의 크기를 축소하는 다양한 정책 대안을 제시했다. 특히 자영업자 사업소득의 정보 확보 등을 통해 개인소득 과세베이스를 확대하는 것은 동시에 부가가치세 및 사회보장세의 과세베이스를 넓히는 효과를 갖는다. 또한 세원 확대를 위한 정책 수단 선택에 있어 세무조사와 같은 행정적 조치도 필요하지만 근본적으로는 경제주체의 유인을 바꿀 수 있는 제도 변화에 초점이 맞추어져야 함을 강조했다.

The Erosion of the Personal Income Tax Base in Italy: Equity Aspects

Il saggio affronta il problema delle conseguenze distributive (e sul gettito) della discrepanza fra l’effettiva base imponibile dell’Irpef e quella proposta nel 1964 dalla Commissione per lo Studio della Riforma Tributaria (il reddito globale del contribuente) - ispirata al concetto di reddito entrata a la Schanz-Haig-Simons. Dal rapporto della Commissione e dagli scritti di Cosciani emerge come venisse ritenuto essenziale per la realizzazione di un sistema tributario perequato l’inclusione nella base imponibile dell’imposta personale progressiva di tutti gli elementi di reddito. Tuttavia, l’Irpef nasce nel 1974 escludendo dalla base imponibile gli interessi - con un arretramento rispetto alla preesistente imposta complementare - ed il processo di erosione della base imponibile dell’Irpef e proseguito fino ad oggi, in particolare rispetto ai redditi di capitale. La parte finale del saggio presenta un calcolo del contributo dato dalle diverse tipologie di reddito alla base imponibile dell’Irpef in rapporto al Pil fra il 1980 e il 2012, ed una valutazione - utilizzando i dati delle dichiarazioni dei redditi relativi al 2010 -dell’effetto redistributivo che deriverebbe dall’inclusione nella base imponibile Irpef dei redditi delle attivita finanziarie attualmente soggetti a imposta sostitutiva.

The choice of the personal income tax base

Starting with Vickrey (1945) and Mirrlees (1971), the optimal tax literature has studied the design of a personal income tax. The assumed ideal would be to tax earnings ability. Earnings ability is unobservable for tax purposes, however. Past papers have focused instead on designing a tax on labor income.Existing tax bases, though, depend on a broader range of information about each individual than just labor income. In principle, this supplementary information can help in designing a tax that has more attractive distributional properties, by more closely approximating an ability tax. The objective of this paper is to lay out theoretically and estimate empirically how to make best use of available information about each individual in addition to earnings, in a setting where the first-best tax would be an ability tax. The theory lays out an equity/efficiency trade off when choosing the tax base. In the empirical work, we find the tax base that is best on equity grounds alone.We find that the choice to tax couples based on their joint income, and the inclusion of dividends, interest income, and dependents' deduction in the tax base in roughly their current form can be rationalized simply based on their value in better approximating an ability tax, without any need for supplementary motivations for these provisions. However, the inclusion of mortgage and property tax payments in the list of itemized deductions cannot be defended on these grounds.

State income tax reciprocity agreements and small businesses

Purpose – Small businesses play a vital role in job creation and economic growth, and previous studies have noted that higher state tax rates may reduce entrepreneurial activity, growth, and hiring. The paper aims to discuss this issue. Design/methodology/approach – In this paper, the authors use a 1989-2005 panel of state-level data to explore the effects of state income tax reciprocity agreements on several measures of small business activity. Since a reciprocity agreement exempts non-resident income from a state's personal income tax base, it has the potential to reduce barriers to entrepreneurial activity and lower tax compliance costs. Findings – The results indicate that reciprocity agreements appear to have reduced the tax-rate sensitivity of entrepreneurial activity, which may lead to more small business and entrepreneurial activity in states with more active agreements, other factors constant. This suggests that personal income tax reciprocity agreements may be a credible policy tool to expand small business activity. Originality/value – In this study, the paper sets out to determine if small business and entrepreneurial activity is greater in states that have reciprocity agreements and if such activity is dependent on the number of active agreements in place. Given recent nationwide efforts to ease compliance costs for business through other initiatives such as the Telecommuter Tax Fairness Act and the Streamlined Sales Tax Agreement, this study is the first to quantify how decreasing tax compliance and eliminating barriers to labor mobility affects small business activity. The results therefore have the potential to help shape debates in many states today.

Taxing Owner-Occupied Housing: Comparing the Netherlands to Other European Union Countries

This paper compares owner-occupied housing tax regimes in the Netherlands and the other countries in the EU-15. the Netherlands appears to stand apart in two respects. First, in Luxembourg and the Netherlands owner-occupiers have to include an imputed rental income in their taxable income. Second, in the Netherlands, the tax-deductibility of mortgage interest payments is almost unrestricted. The tax regime of owner-occupied homes increasingly erodes the personal income tax base in the Netherlands, so that higher tax rates are needed to collect a given amount of revenue. However, elimination or reduction of the mortgage interest deduction can only be realized gradually. Due to a lack of data both within the various tax regimes and across time periods, a comprehensive multivariate time-series comparison among the various tax regimes in the EU-15 is not possible. Thus, the statistical analysis is limited to bivariate comparisons.

Should Jamaica Tax Corporate Income?

This article evaluates Jamaica’s corporate income tax and tax incentive schemes. There are considerable administrative burdens and economic distortions associated with Jamaica’s income tax regime that result from taxing capital income in a “small open economy.” These burdens make a strong argument for repealing Jamaica’s corporate income tax. However, this tax is an important source of government revenue, and the political realities are such that repeal may not be a viable option. That being the case, Jamaica may have little choice but to try to broaden the tax base by trimming back on the tax incentive regime, committing the resources needed to improve enforcement of the corporate income tax, and lowering the tax rate in a revenue neutral manner. This approach would have the advantage of preserving an important source of tax revenue, staunching the erosion of the personal income tax base due to income shifting, and reducing the complexity and economic distortions associated with the current tax structure.

Globalisation and the dilemmas of income taxation in Australia

Over the past two decades there has been a worldwide fall in statutory corporate tax (CT) rates. Focusing on Australia, this article establishes three empirical facts which challenge much of the existing literature. First, CT competition was the crucial driving force behind CT cuts. Second, policy makers had to abandon tax‐related investment incentives in order to pay for lower CT rates. This broadening of the CT base is costly, because it potentially disadvantages domestic firms and may, over the longer term, erode the CT base. Third, CT cuts have put pressure on the personal income tax base, as low corporate rates provide tax avoidance opportunities for high‐income earners.

Sharing the Pain of Social Security and Medicare Reform

In combination with current trends in health costs, adjustments now scheduled for Social Security, Medicare and the income tax are likely to offset virtually all of the increase in Social Security cash benefits that future economic growth would otherwise produce. Current law will reduce future Social Security benefits in two ways, through the increase in the normal retirement and the expansion of the fraction of benefits included in the personal income tax base. Medicare projections suggest that beneficiaries also will have to devote an increasing fraction of their remaining benefit income to paying out-of-pocket health expenses and Medicare premiums and deductibles. Under current projections, the net earnings of future workers (their earnings after paying income and payroll taxes) will grow much more rapidly than the net benefits (Social Security benefits net of health costs) of retirees. The gap between the prospects of future workers and the prospects of future retirees is large enough that the current Medicare and Social Security financing problems could be addressed entirely through increases in taxes on future workers, without disadvantaging future workers relative to future beneficiaries. Indeed, the gap appears large enough also to allow the addition of a modest prescription drug benefit to Medicare. Restoring fiscal balance to Social Security and Medicare through higher taxes on future workers also does not appear to create intergenerational equity problems. The intergenerational transfers that current children can expect to receive from their parents within the confines of a typical family would still exceed the burden of the payroll tax payments flowing from these children back to their parents over the balance of their work careers.

Budgetary and Efficiency Effects of Housing Taxation in the United States

In the context of a dynamic general equilibrium model of the U.S. economy this paper analyzes the budgetary and efficiency effects of eliminating both the deductibility of housing mortgage interest payments from the personal income tax base and the tax exemption of imputed housing rents for owner-occupants. Simulation results suggest that both policies would boost tax revenues. They would, however, have a small contractionary effect on GDP. Moreover, when tax revenue effects are neutralized, both policies would marginally improve long-term allocation efficiency. Rigidities in the accumulation of housing assets would, however, lead to short-term efficiency losses.

Erosion of the Personal Income Tax Base in Canada and the United States.

Erosion of the Personal Income Tax Base in Canada and the United States.

Erosion of the Personal Income Tax Base in Canada and the United States

Erosion of the Personal Income Tax Base in Canada and the United States