Revenue Neutrality Research Articles

Sustainable deployment of autonomous vehicles dedicated lanes in urban traffic networks

Autonomous vehicles (AVs) show promise for increasing roadway safety and capacity. During the AV transition era, which will be characterized by a mixed fleet of AVs and human-driven vehicles (HDVs), it is expected that the allure of these prospective benefits will motivate road agencies to allocate AV-dedicated lanes. This paper proposes a sustainability-driven AV-dedicated lane and pricing policy (SALP) framework that addresses the three pillars of sustainable development—social, environmental, and economic. The framework is formulated as a bi-level problem where the upper-level model yields decisions on the timing, location, and quantity of AV-dedicated lanes and tolling levels to minimize total travel time, emissions, and electricity consumption costs (that is, the economic and environmental pillars). To alleviate potential inequity (the social pillar), two considerations are proposed: revenue neutrality to compensate for the increase in travel costs of travelers and an equity constraint to limit the exacerbation of HDV travel costs. At the lower level, travelers react to the decisions made at the upper level by choosing their vehicle types (AV vs. HDV) and routes. The SALP is solved using Genetic and Frank-Wolfe algorithms. The results of the numerical experiments suggest that the proposed SALP addresses all three pillars, as it yields significant reductions in total travel time, emissions, and electricity costs.

Market design for tradable mobility credits

Tradable mobility credit (TMC) schemes are an approach to travel demand management that have received significant attention in recent years as a promising means to mitigate the adverse environmental, economic, and societal effects of urban traffic congestion. This paper proposes and analyzes alternative market models for a TMC system – focusing on market design aspects such as allocation/expiration of credits, rules governing trading, transaction fees, and regulator intervention – and develops a methodology to explicitly model the dis-aggregate behavior of individuals within the market. Extensive simulation experiments are conducted within a combined mode and departure-time context for the morning commute problem to compare the performance of the alternative designs relative to congestion pricing and a no-control scenario.The results indicate that small, fixed transaction fees can effectively mitigate undesirable speculation in the market without a significant loss in efficiency (total welfare) whereas proportional transaction fees are less effective, both in terms of efficiency and in avoiding undesirable speculation. Further, an allocation of credits in continuous time can be beneficial in dealing with non-recurrent events and avoiding concentrated trading activity. In the presence of income effects, despite small, fixed transaction fees, the TMC system yields a marginally higher social welfare than congestion pricing while attaining revenue neutrality. Moreover, it is more robust in the presence of forecasting errors and non-recurrent events due to the adaptiveness of the market. Finally, as expected, the TMC scheme is more equitable (when revenues from congestion pricing are not redistributed) although it is not guaranteed to be Pareto-improving when credits are distributed equally.

India’s GST Paradigm and the Trajectory of Fiscal Federalism: An Analysis with Special Reference to Kerala

Since the design and implementation of GST is often perceived as a difficult task, especially in developing countries with federal constitutional structures, the introduction of GST in India in 2017 has been considered a great achievement. Against this background, this article explored the characteristics of India’s GST paradigm from a fiscal federal perspective, its implementation and the tax performance of States under GST. The Indianized GST paradigm, built on the edifice of GST Council and three key pillars of revenue neutrality, tax sharing between the Centre and the States and the provision for GST compensation, has been designed towards fostering cooperative federalism. Our analysis revealed that the revenue neutrality has not been ensured and there were also issues with tax sharing and GST compensation. Both the edifice and the pillars of GST, therefore, were fraught with fault lines in both the design and implementation. Tax effort of the States did not increase indicating that GST has not been helpful in improving the revenue position of the States. Although India’s GST paradigm was destined to foster cooperative federalism the outcomes appear to lead us towards coercive federalism. JEL Codes: H71, H73, H77

Is Revenue Neutrality in Carbon Taxation Possible in Practice? Lessons from the Canadian Experience

While the potential economic efficiency, equity, and political acceptability benefits of a revenue-neutral carbon tax have been well studied, a deeper question remains about the feasibility of revenue neutrality in practice. This article provides perspective on this issue by assessing different definitions of revenue neutrality and presenting an in-depth discussion of the motivations for the adoption of revenue-neutral carbon taxes. Two examples of carbon taxes and revenue recycling implemented in Canada are examined: British Columbia's revenue-neutral carbon tax (a carbon tax with offsetting tax cuts) and the Canadian federal government's fuel charge and climate action incentive tax credit (a carbon tax and dividend). The BC case serves to highlight the inherent difficulties of assessing revenue neutrality owing to uncertainty about what would have occurred in the absence of the tax. As time passes following initial implementation of the tax, it becomes increasingly difficult to determine whether, and to what extent, government revenue, income tax rates, the overall tax structure, and the tax base might have differed had the tax not been adopted. The federal example suggests that a carbon tax and dividend policy would be better able to ensure revenue neutrality.

Analysing the effectiveness of demand-side rental subsidies: the case of Australia’s Commonwealth Rent Assistance scheme

Proponents of demand-side rental subsidy programmes have argued that they enhance consumer choice while costing less than supply-side interventions. However, unanswered questions remain on the effectiveness of demand-side rental subsidies in reducing affordability stress among low-income renters. This paper analyses Australia’s Commonwealth Rent Assistance (CRA) as a case study for evaluating the effectiveness of housing allowance interventions. Our evaluation exemplifies some important policy principles. First, we demonstrate that a multi-pronged package can simultaneously improve adequacy and targeting on those in greatest housing stress, while maintaining revenue neutrality. Second, whether CRA is designed as an income-oriented or housing-oriented subsidy can affect its effectiveness in improving rental affordability. Third, country-specific institutional contexts cannot be ignored. In Australia, constitutional amendments may be required if CRA is to be paid as a stand-alone housing payment rather than as a supplement to other social security payments. Furthermore, given the role of CRA in the esoteric funding structure of social housing, reforms to payment structure must incorporate meaningful measures to avoid unintended damaging consequences in this arena. Finally, any implementation of reforms should be embedded within a strong housing logic that aims to reduce affordability stress rather than as part of a fiscal cost reduction exercise.

Congestion tolling — Dollars versus tokens: Within-day dynamics

Tradable credit schemes (or tolling in tokens) are a form of quantity control, which promise to be an appealing alternative to congestion pricing (or tolling in dollars) owing to considerations of revenue neutrality, equity, reduced infrastructure costs, and political acceptability. The comparative performance of the two instruments under uncertainty in demand and supply has only recently received attention in the transportation setting, despite being widely studied for emission markets. In this paper, we add to this literature by considering a tradable credit scheme in a departure time context wherein users are provided an initial endowment of tokens by the regulator and incur a token charge (determined prior to all departures) to travel in a specific time-period. Tokens can be bought and sold within a marketplace at a price determined endogenously by token demand and supply. Two key features of the market model are: (1) the time-of-day dynamics of price is explicitly modeled through a smooth market clearing mechanism in each period, and (2) the selling decisions of users, which determine the distribution of token supply in the market over the day are explicitly modeled. This enables us to study the impact of selling behavior on performance of the credit system. Travel demand is modeled using a logit mixture model and supply consists of static congestion.Extensive experiments under stochastic demand show that when the tolls (in dollars and tokens) are not day-to-day adaptive, tolling in tokens outperforms tolling in dollars when congestion effects are more severe (e.g., realistic BPR models and steep congestion functions, high demand levels and high day-to-day variability). Importantly, we find that this result is robust with respect to selling behavior in the market, although there can be welfare losses in the quantity control system when selling behavior in the market is excessively irrational. These findings underscore the importance of examining disaggregate market behavior when designing tradable credit schemes. Moreover, when the supply of tokens can be adapted from day to day, the credit system was found to be superior in all tested scenarios, provided the selling behavior of individuals is rational. Finally, even in the case when toll revenues in the price instrument are equally redistributed (often difficult in practice), tolling in tokens (when tokens are equally distributed) is marginally more equitable in scenarios where congestion effects are more severe. These findings make a case for tolling in tokens.

Managing network congestion with a trip- and area-based tradable credit scheme

This study proposes a trip- and area-based tradable credit scheme (TCS) for congestion management in the context of the morning commute problem using a trip-based Macroscopic Fundamental Diagram model with heterogenous travelers. In our proposed TCS, the regulator distributes credits to all travelers and designs a time-varying and trip-based credit tariff. Credits are traded between travelers and the regulator via a credit market at the price determined by credit demand and supply interactions. The TCS is incorporated into a day-to-day modeling framework to examine travelers’ learning process, network state evolution, and credit market properties. The conditions for existence of an equilibrium solution and uniqueness of the equilibrium credit price are established analytically. Simulation results validate the analytical properties, demonstrate that the proposed TCS yields identical social welfare as the congestion pricing while maintaining revenue neutrality, and show the superiority of a trip-based TCS to (trip agnostic) area-based TCS.

The value of flexible flight-to-route assignments in pre-tactical air traffic management

In European air traffic management, there are discussions regarding the future role of the network manager (NM): in particular, should the NM be able to assign flights to specific trajectories, should airspace users be allowed to freely choose their preferred trajectory, or something in between? In this paper, we develop a modeling framework that can be adapted to these settings to assess their effect on key performance indicators.We focus on the pre-tactical stage of planning air traffic for a future departure day, meaning that airspace capacity budgets are given and incoming flight intentions need to be offered one or several ‘trajectory products’ for a (possibly dynamically determined) charge. These trajectory products differ in the amount of flexibility that they provide the NM to route the flight. Charges are set so as to reward greater flexibility of airspace users with lower charges. The airspace user chooses one of the offered trajectory products according to a choice model that reflects their preferences given, among others, the product charges. Shortly before the departure day, the NM decides simultaneously on the routing (within the limits defined by the purchased trajectory products) and on each airspace’s sector opening scheme (within the limits of the fixed capacity budgets) so as to minimize the overall displacement cost. Methodologically, the problem deviates from typical dynamic pricing problems in various major ways, e.g., featuring a boundary condition that we show to be NP-hard as well as fairness and revenue neutrality constraints. The problem is cast in the form of a dynamic program. We exploit a certain structure in the boundary condition to formulate an efficient heuristic. Based on a numerical case study, we find that the use of dynamically priced trajectory products achieves a cost performance close to the one obtained if the NM has a mandate to simply assign flights to trajectories. Therefore, this seems an attractive design for the role of the NM, giving airspace users some choice whilst achieving low overall costs.

How Many Are Too Many? Analyzing Dockless Bikesharing Systems with a Parsimonious Model

Using a parsimonious model, this paper analyzes a dockless bikesharing (DLB) system in a city, where the DLB service competes with walking and a generic motorized mode. The DLB system operator chooses a fleet size and a fare schedule that dictate the utility of its service. The access time to the service---a crucial component in the utility---is modeled as a function of the number of unique bike locations, which is estimated from the number of idle bikes through an empirical relationship. The market equilibrium is formulated as a solution to a nonlinear equation system, over which three design problems are formulated to maximize (i) profit; (ii) ridership; and (iii) social welfare. We calibrate the model against empirical data collected in Chengdu, China and test three counterfactual strategies, each for one of the three design problems. We find: (i) the current fleet limit set by Chengdu should be cut by roughly two thirds in order to avoid severe oversupply and waste; (ii) maximizing ridership keeps the fare at an affordable level to maintain revenue neutrality, while raising ridership and social welfare close to system optimum; (iii) for a regulator seeking to influence the DLB operator for social good, the choice of policy instruments depends on the operator's objective. When it focuses on profit, limiting price is a much more effective policy than limiting fleet size. If, instead, the operator aims to grow its market share, then setting a limit on fleet size becomes a dominant strategy.

Enforcing fuel-optimal traffic patterns

Traffic Assignment (TA) models route choices of users of a road transport network assuming a known relationship between traffic flow and travel cost, and fixed demand between origin and destination points in the network. In this paper, we consider the case where the users’ travel cost function is a weighted sum of travel time, fuel consumption, and tolls. We show the existence of speed limits and tolls whose combination induces a traffic pattern with minimum total fuel consumption as a user equilibrium. This result holds both in the case where all tolls are required to be non-negative as well as in the case where negative tolls (subsidies) are allowed but network-wide revenue neutrality of the toll scheme is required. With respect to the speed limits, arbitrary non-negative values are allowed in our model, but we additionally analyze the more realistic scenario in which only a discrete set of speed limits (e.g., integer multiples of ten) is available. While this restriction of the available speed limits may lead to an increase in the total fuel consumption achievable in a user equilibrium, we prove upper bounds showing that the increase is very small for real-world TA instances.

Policy design and public support for carbon tax: Evidence from a 2018 US national online survey experiment

AbstractPublic support for policy instruments is influenced by perceptions of how benefits and costs are distributed across various groups. We examine different carbon tax designs outlining different ways to distribute tax revenues. Using a national online sample of 1,606 US respondents, we examine support for a $20/ton carbon tax that is: (1) revenue neutral: revenue is returned to citizens via tax cuts; (2) compensation‐focused: revenue is directed to helping actors disproportionately hurt by the tax; (3) mitigation‐focused: revenue funds projects reducing carbon emissions; and (4) adaptation‐focused: revenue is directed to enhancing community resilience to extreme weather events. We find devoting revenue to mitigation raises overall support for carbon tax by 6.3 per cent versus the control (54.9 per cent) where no information on spending is provided. Other frames raise support in specific subgroups only. Revenue neutrality raises support among lower‐income households (+6.6 per cent) and political independents (+9.4 per cent), while compensation increases support among lower‐income repondents (+6.1 per cent).

Implementing dynamic electricity taxation in Denmark

This paper investigates how to implement residential dynamic taxation in Denmark. To this end, it proposes three dynamic schemes that can be implemented by the Danish government. In particular, the paper studies one Ad-valorem and two different per-unit tax schemes, which respectively depend on electricity consumption and CO2 emissions. A second contribution of the paper is to perform a holistic impact assessment based on six different categories, which decision makers can utilize to evaluate taxation schemes. These are: CO2 emissions saved; the social cost of CO2 savings; revenue neutrality; the composition of the production mix; transparency and predictability of taxation schemes; and how much consumption can be shifted. Based on the findings, a recommendation directed at Danish decision makers in the energy sector is presented. Results stand in contrast to earlier findings in the literature and suggest that a per-unit (excise) dynamic taxation scheme that depends on the level of consumption is preferred over a per-unit taxation scheme that depends on CO2 emissions or an Ad-valorem tax on the retail electricity price. This assessment is based on the considerations that the preferred scheme: (1) incentivizes greater demand-side flexibility, (2) reduces CO2 emissions more efficiently, (3) depends on a predictable random variable, i.e. electricity consumption.

The cost of congestion and the benefits of congestion pricing: A general equilibrium analysis

The benefits of congestion pricing are examined with a spatially detailed computable general equilibrium model of the Greater LA region. The model treats choices of roads on a network, of driving or public transit, of residence and job location, of non-work trip patterns, of housing type and size; vacancies and new construction, production, interindustry trade and exports. The aggregate benefit of pricing LA County road congestion increases 2.7 fold when the toll revenue is recycled to cut the income tax of the poorer LA County workers while maintaining region-wide tax revenue neutrality. Consumers get 66% of the aggregate benefit and landlords 41%, while importers suffer losses equal to 7% of the aggregate benefit. Gross regional product increases by 1.34%. The aggregate benefit changes negligibly when the toll revenue is recycled to cut sales taxes instead of the income tax, but gross product still rises by 0.6%. Under the sales tax cut, consumers, importers and landlords benefit more evenly than under the income tax cut, but with the property tax cut nearly all of the cut is capitalized into property values.

Carbon Tax Shifts and the Revenue-Neutrality Dilemma

Over the past two decades, numerous experts and politicians have proposed “revenue-neutral carbon tax shifts,” under which a government implements a carbon tax and uses the resulting revenue to cut other taxes by an equal dollar amount. These proposals commonly include legal or political mechanisms to bind governments to revenue neutrality over time. This Article’s central claim is that revenue neutrality suffers from conceptual and epistemic confusion that should lead to reconsideration of the policy merits of carbon tax shifts. To illustrate the argument, the Article provides the first retrospective review in the legal literature of carbon tax shifts from four jurisdictions, two of which were implemented and then repealed, and two of which were rejected by voters at the ballot box. In each jurisdiction, the carbon tax shift was afflicted by confusion between two substantially different conceptions of revenue neutrality, which can be termed “backward-looking” and “sideways-looking” revenue neutrality. This confusion is difficult to resolve because the choice between the two conceptions presents governments with a dilemma: backward-looking revenue neutrality is normatively undesirable, while sideways-looking revenue neutrality is difficult to enforce through legal and political mechanisms. This Article argues that the dilemma should be taken into account when choosing between carbon tax shifts and alternative uses of carbon pricing revenues. The dilemma also has implications for revenue-neutral tax reform in other contexts: it is far harder to separate the question of “how to tax” from the question of “how much to tax” than is commonly understood.

Pricing three cases of performance fees using options methodology

PurposePrior research has demonstrated that investment management performance fees have the characteristic of a call option. It is important to examine whether these performance fees are consistent with traditional fee structures used by investment managers. It is also worth examining whether clients or managers benefit significantly more than the other party under performance fee structures. The paper aims to discuss these issues.Design/methodology/approachThe authors use Black-Scholes options pricing methodology to examine three cases of performance fee structures. The Absolute Hurdle case examines the fee structure where the manager receives a portion of the return over a pre-defined absolute rate of return. The Benchmark Relative Hurdle case shows a fee structure based on performance in excess of the return of a benchmark portfolio. The Breakeven Relative Hurdle case illustrates the fee structure where there is revenue neutrality with the classic management fees when portfolio performance matches the benchmark.FindingsThe findings of this paper illustrate that a particular performance fee structure can be designed to have the same revenue as a traditional investment management fee structure. Such a structure is equally beneficial to both the investment manager and to the client and should have salutary motivational effects to improve investment results, while simultaneously rewarding the manager for value added at a fair price for both the manager and the investor.Originality/valueThis study is unique in that it examines three cases of performance fees and provides a comparison between performance fee structures and traditional investment management fee structures. The findings will assist investment portfolio managers in better setting management fees they charge clients. In addition, this study help with clients who feel they are being charged excessive management fees by their investment manager.

Exploring the impacts of a low-carbon policy instrument: A case of carbon tax on transportation in China

The rapid growth of energy consumption and CO2 emission in transportation has brought great challenges to China’s energy demand and environmental issues. Carbon tax, considered as an efficient low-carbon policy instrument, can effectively reduce the use of fossil fuels and improve energy efficiency. This study aims to explore the impacts of a transportation carbon tax on transport sectors, macroeconomy and social welfare by developing a computable general equilibrium (CGE) model. Meanwhile, to achieve fiscal revenue neutrality, two schemes are employed for revenue recycling. One is that all of the carbon tax revenue is recycled to subsidize households through lump-sum transfer; the other one is that carbon tax revenue is used to reduce the income tax of households and enterprises. The simulation results show that the appropriate carbon tax rate is 50 Chinese Yuan (RMB)/ton-CO2. At this level of taxation, energy demand and carbon reduction have fewer negative impacts on the macro-economy and transport sectors. We also find that the appropriate carbon tax rates among different transport sectors and different energy categories are different. The appropriate carbon tax rates for airlines, railway, urban transport and water transport are same (50 RMB/ton-CO2), while the appropriate carbon tax rate for road transport sector is 60 RMB/ton-CO2. The recycling of carbon tax revenue to households and enterprises should be implemented to realize the “weak double dividend” effect of the carbon tax.

Harnessing the Power of the Cloud: Revenue, Fairness, and Cloud Neutrality

Cloud computing is a transformational technology that reduces upfront infrastructure costs, democratizes access to computing and storage capacity, and helps businesses innovate and compete in the digital economy. However, the distribution of these significant social and economic benefits among the various stakeholders in the cloud ecosystem will critically depend on pricing and resource allocation decisions made by cloud providers. These decisions impact not only the provider revenue, but also the fairness of resources allocated among cloud users and the overall social welfare. Several unique features of cloud computing (e.g., the presence of multiple, nonfungible resources and heterogeneous users) make the interplay between these competing objectives hard to understand. To truly harness the power of cloud computing and to establish regulatory benchmarks, there is a need for frameworks that quantify how resource allocation and pricing choices affect different objectives. In this work, we introduce an analytical model that incorporates user utility, endogenous pricing, fairness among heterogeneous users, social welfare, and cloud provider revenue. We identify conditions under which there is a tradeoff between fairness and revenue, and quantify the extent of this tradeoff by formulating an optimization problem in which a cloud provider maximizes its revenue, subject to constraints on the desired level of fairness. Our work provides an initial step toward developing regulatory policies for cloud neutrality to ensure an equitable distribution of the transformative benefits of the cloud.

Summary of the General Discussion on “The Effect of an Introduction of Retail Sales Tax in China”

June 01 2018 Summary of the General Discussion on “The Effect of an Introduction of Retail Sales Tax in China” Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2018 by the Asian Economic Panel and the Massachusetts Institute of Technology2018Massachusetts Institute of Technology Asian Economic Papers (2018) 17 (2): 24. https://doi.org/10.1162/asep_a_00603 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Summary of the General Discussion on “The Effect of an Introduction of Retail Sales Tax in China”. Asian Economic Papers 2018; 17 (2): 24. doi: https://doi.org/10.1162/asep_a_00603 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search Suresh Narayanan commented that China has a strange value-added tax (VAT) in that it does not zero-rate agricultural products. Therefore, results cannot be generalized. Substituting VAT for business taxes is not heard of. He pointed out that a 5 percent decline in retail sales tax (RST) coupled with a 5 percent increase in VAT will not result in the same amount of government revenue collected because VAT has exemptions and thus the RST has to change more to result in revenue neutrality. The RST has a single collection point only, whereas the VAT has multiple collection points. Li and Liu's model does not take care of this difference in feature. Furthermore, Narayanan asked whether this model applies when there are no labor market frictions. He suggested that the model be extended in this direction. The authors agreed with Narayanan's observation that a decline in VAT and an increase in RST... You do not currently have access to this content.

Addressing the Debt-Equity Bias within a Common Consolidated Corporate Tax Base (CCCTB) – Possibilities, Impact on Effective Tax Rates and Revenue Neutrality

Corporate tax systems encourage the use of debt rather than equity finance. This corporate debt bias is a matter of concern in light of its implications for macrofinancial stability. In October 2016, the European Commission addressed the issue in its relaunched proposal of a Common (Consolidated) Corporate Tax Base (CC(C)TB). Various reform options to alleviate the debt bias and increase financing neutrality of tax systems exist. Whether such reforms are indeed effective from the point of view of EU Member States depends on how they interact with the specific local tax codes. Based on the well-established indicators of the effective tax burden of companies according to the Devereux/Griffith methodology, this paper analyses the impact of four fundamental tax reform options on financing neutrality in each EU Member State. The results show that all fundamental tax reform options largely establish financing neutrality in the EU Member States but considerably differ in their consequences for corporate investment.

Addressing concerns about climate policies: the possibilities and perils of responsive accommodation

ABSTRACTResponsive accommodation is a political strategy that addresses concerns about a policy proposal by incorporating amendments that address those concerns. This approach can broaden the policy’s appeal, but is strategically risky, as it can alienate the policy’s base of support. We examine this strategy and its application in the politics of climate change. Using a novel survey experiment, relative public support is evaluated for two amendments to a carbon tax proposal – revenue neutrality assurances and a carbon tariff – designed to ease concerns about taxes and global competitiveness. Analysis shows that support for a carbon tax increases when coupled with a carbon tariff, but decreases among some of the policy’s supporters when described as revenue-neutral. These results suggest that policymakers using a responsive accommodation strategy must carefully weigh its possible risks and rewards in their particular context.