Progressive Tax Rates Research Articles

Efficiency and Progressivity Measures of the Flat Tax with a Special Focus on Bosnia and Herzegovina

The research begins with a brief overview of the personal income taxation trends in developed and transition countries in the past thirty years. During this period, we determine that in developed countries there has been a shift from equity towards efficiency principle conducted by a reduction of top progressive personal income tax (hereafter: PIT) rates and through base broadening. For selected transition countries, we develop a theoretical benchmark model under flat tax and compare it in practice in order to measure efficiency in terms of tax neutrality. We find very few characteristics of theoretical flat tax applied in practice causing inefficiency. We also analyse the progressivity indicators as an equity enhancing measure under flat tax. Progressivity indicators are very low and are a result of the flat PIT and flat social security contributions (hereafter: SSCs). Finally, for the case of Bosnia and Herzegovina (B&H), efficiency and progressivity measures can be enhanced indicating that PIT reforms should be brought together with SSCs reforms.

Taxation and Marriage: A Reappraisal

An income tax cannot simultaneously maintain progressive marginal tax rates, an equal tax burden for all married couples with identical incomes (couples equity), and neutrality with respect to the tax burden of married vs. unmarried couples (marriage neutrality). Existing treatments of this of marriage taxation argue that marriage neutrality is a more important principle than couples equity or vice-versa and advocate abandonment of the lesser principle. The literature also treats progressivity as inviolate and outside the scope of the trilemma. This paper argues that the prior literature is flawed. The costs of violating the principles of couples equity and marriage neutrality and progressivity are not linear but convex — large violations of any principle are considerably worse than small violations of all. Instead of solving the trilemma by strict adherence to two principles and disregard of the other, the taxation of marriage should violate all of marriage neutrality, couples equity, and progressivity to a lesser degree, sharing the burden of the trilemma more broadly.

Taxation in the Ramsey–Solow Model

We study and compare two taxation schemes (based on a single tax rate and a progressive tax rate respectively) within the framework of the Ramsey–Solow model. Bibliography: 6 titles. Illustrations: 3 figures.

ANALISIS PENGENAAN TARIF PAJAK PROGRESIF PADA PAJAK KENDARAAN BERMOTOR BERDASARKAN THE FOUR MAXIMS DI KABUPATEN MINAHASA

Motor vehicle tax has strong enough role in the aceptance of local revenue. In North Sulawesi progressive tx on motor vehicles is valid from 12 january 2012 based on Law No. 28 of 2009on local taxes and levies, based on the implementation of provincial regulations SULUT number 7 of 2011 concerning local tax applies to both private motor vehicle ownership and so, the two-wheeled vehicles and four-wheel except for a pick and dumb truck. Principles of taxation proposed by adam smith namely equality, certainly, conveinence of payment, efficiency. Research carried out the UPTD Tondano district of Minahasa. The analytical method used is descriptive analysis (qualittive) that analyzes comparing two different aspects of theory and practice which need to be met in order to know the differences. The purpose of this study is determine how the imposition of a progressive tax rate on motor vehicle tax is based on the four maxims. The result showed that the principle of taxation is still apropriate and relevant to be applied to the motor vehicle tax collection.

A teaching note on the tax benefits of retirement savings

Abstract Typical textbook treatments of tax-advantaged retirement savings plans focus on legalistic characteristics such as contribution limits and early withdrawal penalties. Popular press articles on these plans often present a myriad of details on the effects of inflation, rates of return, expected tax rates, ordinary income versus capital gains treatment, and other items that tend to obscure their fundamental tax advantages. The goal of this teaching note is to expose the fundamental tax advantages of retirement savings plans by conducting an analysis of a simplified tax setting. We identify four interrelated benefits of existing retirement plans – tax-deferred contributions, tax-deferred earnings, never-taxed earnings, and income smoothing with progressive tax rates. We also provide a more in-depth analysis of the choice between the two most popular forms of retirement savings, traditional and Roth accounts. An understanding of the properties of the tax benefits of retirement savings can be useful for students who are preparing for careers as tax professionals, as well as individuals who wish to understand the financial planning advice they receive.

Income Inequality, Ideology and Indifference of our Times

High Gini Coefficient has the potential of retarding Gross Domestic Product (GDP) of a country besides being socially corrosive. Piketty’s master piece ‘Capital’ (2014) has debunked the myth of Kuznets’ inverted ‘U’ curve hypothesis. A recent IMF note endorses his view point and has strongly pitched for redistributive justice through tax policy. Joseph Stiglitz’s recent book ‘The Great Divide’ also brings out strongly the need for effective reforms in our democratic framework so that each country can legitimately be proud of their shared prosperity. This paper takes an overview of literature on inequality since Ricardo (1817) and provides a flavor of multiple dimensions of global inequality and India’s experience post License Quota Permit (LQP) Raj. The paper brings out the difference in the trends of rural-urban income inequality, and the multidimensional deprivations that a vast swathe of rural population suffer from. It strongly recommends a more progressive tax rate structure, imposition of high wealth tax and handsome investment in quality education. For democracy to function effectively it has to be accountable to all. The paper echoes the concerns expressed in the World Economic Forum and calls for elimination of extreme inequality as a national goal, reducing Palma Ratio as the ninth Millennium Development Goal and eschewing crony capitalism.

К 100-летию подоходного налога в России: теоретический анализ основных этапов реформы

Next year will mark 100 years since introduction of the first law on income tax in Russia. Over this period a number of reforms of income taxation has been conducted, and various results have been achieved. It has become of importance to analyze the experience of income taxation reforms. This article aims at studying formation and reformation of income taxation in Russia. The work singles out and analyzes five stages of income taxation formation in Russia, the main focus being on the analysis of the two last stages of income tax functioning: during the transition to the market economy and in the market economy. The article identifies the main prerequisites of the personal income tax reform in 2001 and analyzes the results of the reform. The article validates the conclusion that the reform had mixed results. The transition to the proportional model of the individual income tax failed to significantly affect the fiscal significance of this tax, and did not lead to the desired legalization of salaries or a drastic decrease in the share of wages paid off the books. Moreover, the income tax reform did not result in a significant decrease in the number of tax concessions that reduced the neutrality and fiscal significance of the tax. At the same time, the income tax reform made it possible to drastically increase the neutrality and economic effectiveness of this tax, reduced the cost of administration for taxpayers, withholding agents and tax services. In view of a possible new reform of the tax, the article makes an assumption that return to the progressive tax rates will fall short of expectations of the poor as the wealth gap in Russian society will not be reduced. The article draws a conclusion that as achievement of the expected results is not guaranteed, preserving the existing model of personal income tax may be the most pragmatic option. At the same time, it might be advisable to conduct the inventory of tax deductions, and, possibly, to cancel some of them, the ones enjoyed by the rich in the first place.

Shall High Income Earners Pay More Taxes in The Kyrgyz Republic

2009 yilinda Kirgizistan’da komsu ulkelerdeki benzer reformlar ve vergilemede etkinligin saglanmasi amaciyla tek oranli vergi reformu uygulanmistir. Bu makalede Kirgizistan’da kisisel gelirin vergilendirilmesinde artan vergi oranlarindan tek oranli vergilendirmeye gecisi saglayan reform ile ortaya cikan problemler ele alinmaktadir. Ulkedeki yuksek derecedeki gelir esitsizligi ve butce aciklari dikkate alindiginda tek oranli verginin optimal olmadigi anlasilmaktadir. Bu makalede Kirgizistan icin vergi gelirlerini arttiran ve gelir dagilimindaki esitsizligi azaltan olasi kisisel gelir vergisi duzenlemeleri ve vergi oranlari incelenmektedir. Yuksek gelir elde edenlere uygulanacak en yuksek optimal vergi orani Saez (2001) ve Brewer, Saez, ve Shephard (2008) tarafindan gelistirilen yontem ile hesaplanmistir. Sonuclar ulkedeki mevcut kisisel gelir vergisinin yuksek kazanc elde edenler icin oldukca dusuk oldugunu ve bu nedenle calisma temposunda herhangi bir azalmaya neden olmadan arttirilabilecegini gostermektedir. Bu amacla artan oranli vergi tarifesi veri politikasi uygulayicilari tarafindan orta vadeli perspektifte dikkate alinmalidir

Does professional tax preparation matter? Empirical evidence from Germany

This paper is an empirical assessment of the average effect of tax consultants on non-business taxpayers’ tax burden. The author uses German income tax return data to identify tax returns filed by a tax consultant. In contrast to previous research, propensity score matching is used to construct an appropriate control group to eliminate problems arising from self-selection. The effect of tax consultants is found to be twofold and depends on the income level. On the one hand, tax consultants reduce the tax burden of clients on a high income. Possible reasons for this are the progressive income tax rate as well as income-dependent deductions, e.g., donations, which offer tax consultants greater scope to make use of their superior tax knowledge. However, this effect is reversed for clients on comparatively low incomes. This finding is in line with the interpretation that, besides the already identified disburdening impact, a tax consultant can also act as a preceding enforcement instance that mitigates clients’ excessively aggressive filing strategies.

An Empirical Model of Tax Convexity and Self-Employment

Do progressive marginal income tax rates discourage self-employment? We assume risk neutrality to construct an implicit surtax on stochastic income relative to steady income, arising from a convex tax schedule. It is computed as part of a structural probit model with earnings equations and a tax simulator. The tax convexity variable and the net-of-tax income difference between self- and paid employment have the predicted signs and high levels of statistical significance for the probability of self-employment. A simulated flat tax reform suggests the tax effects are small.

ANTI-CRISIS REGULATION OF AN INDIVIDUAL INCOME TAX AS A MEAN TO INCREASE GOVERNMENT DEMAND

The article contains analysis of the procedure of income tax assessment using flat and progressive tax rate that is directed to accomplish stable economic growth. Periodical press and statistical data of salary in the Ulyanovsk region have been used as the information source. It is shown that modern income tax assessment in Russia fails to deal with the pressing problem of national economics – excess income inequality. The main ways to regulate the process of individual income tax collection are offered in order to find means to maintain economic growth and improve the welfare of Russian citizens. DOI: http://dx.doi.org/10.12731/2218-7405-2013-12-10

An Economic and Environmental Impact Analysis of Carbon Tax Policies: A Case from Inner Mongolia

On the basis of the standard CGE model, the paper built and extended the regional energy environment of the dynamic CGE model, which can be applied to calculate carbon emissions not only from energy consumption but also from production process. It set seven scenarios of carbon policies by adopting the fixed tax rate, progressive tax rate, independent carbon tax rate, and balanced carbon tax respectively. The results show that the progressive tax rate has less impact on regional economy, but plays a constant role of energy conservation and emissions reduction in the long term. Although independent carbon tax can reduce CO2emissions effectively, it has strong negative impact on the domestic economy. The balanced carbon tax rate policy realizes the “double dividend” of carbon tax by reducing the intensity of CO2emissions and increasing the welfare and income of the residents.

The Economic Efficiency of Progressive Taxation

This paper suggests two mechanisms by which a progressive distribution of tax burdens may promote economic efficiency. First, a progressive tax rate structure indexed to the median income may discourage rent seeking by powerful interest groups. Second, progressive taxation favors income streams that are long-sustained over those that pay off over a shorter time span; this bias is likely to favor more socially productive activities. Consistent with these propositions, a marked retreat from progressivity for the top 0.1 percent of earners followed two decades of post-war economic expansion and preceded the productivity slowdown of the 1970s and the serial crises that have followed. The analysis suggests that progressivity is especially important at the top of the income distribution and that a top marginal rate that sets in too low — as would a single rate that applied to the top 0.1 percent of earners — would not achieve the right incentives.

Retirees Beware: Don't Worry About the British -- 2013 is Coming

The easy money policy of the federal reserve and the 15 percent tax rate on qualified dividends have encouraged retirees to reorient their nest eggs away from certificates of deposit, Treasuries, and money market funds to dividend-paying stocks and mutual funds. According to the Internal Revenue Service, 43 percent of taxpayers age 65 or older reported qualified dividend income amounting to nearly half of the qualified dividend income reported by all taxpayers. By contrast, 46 percent of taxpayers age 65 or older reported net capital gains amounting to 30.5 percent of the net capital gains reported by all taxpayers. But 2013 is coming and, unless Congress extends the current rates or reaches an agreement on tax reform, dividends will be taxed as ordinary income at a marginal rate as high as 39.6 percent. The 15 percent tax on most net long-term capital gains is also going to rise by a third to 20 percent. For those whose modified adjusted gross income exceeds a certain amount, there will be a 3.8 percent medicare tax on their net capital gain income and dividend income (and interest income as well as other investment income), bring the highest marginal rate to 43.4 percent. In this article, we propose a compromise for both dividends and capital gains. Instead of taxing dividends as ordinary income and most long-term capital gains at a flat 20 percent rate, our compromise would apply a progressive tax rate schedule to both. We would aggregate all net capital gains and qualified dividends into a single figure, which for convenience we refer to as aggregated dividends and net capital gains or ADCG for short. We don’t propose an exact progressive rate schedule for ADCG. Congress would decide that. A possible schedule would reach the 30 percent marginal rate on $1,000,000 of ADCG and above, and might take the following form: 15 percent on the first $250,000, 20 percent on the next $250,000, 25 percent on the next $500,000, and 30 percent on $1,000,000 and above. The proposed compromise would provide a higher tax rate on the ADCG of the very wealthy while applying a 15 percent rate for those whose ADCG is more modest. We believe that this simple compromise would satisfy those who want the super-rich to pay higher taxes and also satisfy a quite different constituency: retirees who worked for a living, saved as much of their after-tax dollars as they could, and invested their nest eggs in dividend-paying stocks or mutual funds. Our proposal for a progressive-rate system for ADCG, ranging from 15 percent to 30 percent, appears to us to be a sensible compromise. We hope that it appears sensible to Congress, sensible enough to make the compromise permanent, so that small investors who are saving for retirement and those who have already retired will not constantly be in doubt about the future taxation of their nest eggs.

Assessment of bringing in the progressive income taxation in Lithuania

Lately discussions of bringing in the progressive income taxation in Lithuania are increasing. Consensus on this issue in the society is not reached, thus this article aims to reveal the need for the reform of direct taxation in the Republic of Lithuania and to consider aspects of the project of proposed input of the progressive income tax rate and possible consequences of implementing. The aim of the research is to assess the need and initiatives of bringing in the progressive income taxation in Lithuania. This paper describes the theoretical basis for progressive taxation and discloses the need for the reform of direct taxation in the Republic of Lithuania; and assesses the aspects of the project of proposed input of the progressive income tax rate in Lithuania as well as compares them with other countries in the European Union. The results of the research. It is found that the bringing in the progressive income tax rate should be properly reasoned, and the system of the progressive tax rate establishment should be based on calculations and empirical studies; because it can have both positive (short-term) and negative (long-term) impact on the national economy. After the comparison of the proposed system of the progressive tax rate establishment in Lithuania with systems in other countries of the European Union it was revealed that the Lithuanian one could be improved. The main disadvantage of this system is that it does not reduce the payable income tax of lower-income people. Based on the results of the calculations it was established that in order to improve the system of Lithuania it should be taken into the account the system of United Kingdom. Because it is simple and easy to understand, and the government gets the opportunity to correct the non-taxable amount and income ranges according to the tendencies of economic ratios.

A Teaching Note on the Tax Benefits of Retirement Savings

Typical textbook treatments of tax-advantaged retirement savings focus on legalistic characteristics such as contribution limits and early withdrawal penalties. Popular press articles often present a myriad of details on the effects of inflation, rates of return, expected tax rates, ordinary income versus capital gains treatment, and other items that tend to obscure the basic properties of the tax advantage. The goal of this teaching note is to provide economic intuition by undertaking a fundamental examination of the properties of the tax benefits of retirement savings. We identify four (interacting) benefits of existing retirement plans - tax-deferred contributions, tax-deferred earnings, never-taxed earnings, and income smoothing with progressive tax rates. We also analyze a “location problem”, which arises when an employee wants to save more than the amount eligible for tax-advantaged status. An understanding of the properties of the tax benefits of retirement savings can be useful for students who are preparing for careers as tax professionals, as well as individuals who wish to understand the financial planning advice they receive.

Dress to impress: Brands as status symbols

We analyzed the market for indivisible, pure status goods. Firms produce and sell different brands of pure status goods to a population that is willing to signal individual abilities to potential matches in another population. Individual status is determined by the most expensive status good one has. There is a stratified equilibrium with a finite number of brands. Under constant tax rates, a monopoly sells different brands to social classes of equal measure, while in contestable markets, social classes have decreasing measures. Under optimal taxation, contestable markets have progressive tax rates, while a monopoly faces an adequate flat tax rate to all brands. In contrast with extant literature, subsidies may be socially optimal, depending on the parameters, in both market structures.

Income tax on individuals in the Republic of Kazakhstan: “Fairness and efficiency” compromise

Individual income tax can be effective for redistribution of income within a country and, therefore, may help to fight inequality. The paper is aimed at the analysis of the changes in Kazakhstan tax system to determine the type of taxation rate that would be the most appropriate in terms of efficiency and maintenance of equity. Key words: Individual income tax, inequality income, progressive tax rate, flat tax rate, Kazakhstan.

What Would Jesus Do?

Psychology![Figure][1] CREDIT: ISTOCKPHOTO.COM During the past several election cycles in the United States, the association of religious views and voting preferences has been noted. This has led to claims that greater religiosity generates support for conservative policies, which generally favor lower and less progressive tax rates as well as restrictions on same-sex marriage. The take-home message has been that an individual's religious beliefs influence that person's political stance. Ross et al. have used a survey of roughly 500 liberal and conservative Christians to examine the converse proposition—that an individual's political views affect that person's religious beliefs. What they found was that self-described liberals and conservatives exhibited the expected views regarding higher tax rates and gay marriage. What was intriguing, however, were the views that both liberals and conservatives imputed to a contemporary Jesus: Conservatives rated Jesus as being more in favor of higher taxes on the wealthy and more opposed to gay marriage than they themselves were, with an opposite pattern for liberals. By placing more weight on issues on which they projected Jesus as being more extreme than themselves, individuals on both sides of the spectrum were able to reduce dissonance, which might be better characterized as social rather than cognitive, owing to the collective nature of religion. Proc. Natl. Acad. Sci. U.S.A. 109 , 10.1073/pnas.1117557109 (2012). [1]: pending:yes

Equity Implications Of A Corporate Tax Reform

The paper attempts to access the likely distributional effects of the corporate tax reform in Greece. The major distributional consequences of introducing a new corporate tax system upon dividend policy, on the share prices, the shifting and incidence of the tax and the removal of the existing tax inequities. The equity implications from the introduction of the new system could be summarized as follows: The new system favours distribution to less degree than the old system which means that under the latter a larger proportion of income could be closely adjusted to taxable capacity of the individual shareholder. On the other hand, under the new system corporate income is taxed by a flat and not by a progressive tax rate as the principle of taxable capacity would suggest. If we accept that higher payout ratios have a positive effect upon share prices then, since the new system favours distribution to a less degree than the old system it would have a negative effect upon share prices. Finally, the greater tax burden on the corporation level, under the new system, provides the corporation with a greater incentive to shift the tax.