Do political incentives matter for tax policies? Ideology, opportunism and the tax structure

This paper investigates the importance of political ideology and opportunism in the choice of the tax structure. In particular, we examine the effects of cabinet ideology and elections on the distribution of the tax burden across factors of production and consumption for 21 OECD countries over the period 1970-2000 by employing four alternative cabinet ideology measures and by using the methodology of effective tax rates. There is evidence of both opportunistic and partisan effects on tax policies. More precisely, we find that left-wing governments rely more on capital relative to labor income taxation and that they tend to increase consumption taxes. Moreover, we find that income tax rates (but not consumption taxes) tend to be reduced in preelectoral periods and that capital effective tax rates (defined broadly to include taxes on selfemployed income) are reduced by more than effective labor tax rates.

Tax smoothing in a business cycle model with capital-skill complementarity

This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity, endogenous skill formation and stochastic shocks to public consumption as well as total factor and capital equipment productivity. Our main finding is that an empirically relevant restriction which does not allow the relative supply of skilled labour to adjust in response to aggregate shocks, signi cantly changes the cyclical properties of optimal labour taxes. Under a restricted relative skill supply, the government fi nds it optimal to adjust labour income tax rates so that the average net returns to skilled and unskilled labour hours exhibit the same dynamic behaviour as under fl exible skill supply.

Aggregate shocks or vertical tax interdependence? Evidende from gasoline and cigarettes

[cat] Besley i Rosen -1998- van ser els primers autors en estimar empíricament la rellevància de les externalitats impositives verticals. Aquests autors varen fer-ho per al cas dels impostos sobre la benzina i el tabac, en concret, per al cas dels EEUU. Ara bé, no varen tenir en compte les diferències en el nivell de vida entre Estats: àrees amb un nivell elevat paguen menys en termes reals que àrees amb un nivell de vida baix, doncs l'impost unitari sobre la benzina o sobre el tabac no difereix d'acord amb l'Estat on l'impost s'aplica. En conseqüència, proposem que la competència impositiva vertical sigui estimada deflactant totes les variables monetàries utilitzant l'anomenat "House Price Index (HPI)", el qual està disponible al nivell dels Estats. Això genera una variable impositiva federal expressada en termes reals i que presenta variació entre Estats. Aquesta estratègia empírica ens permet diferenciar entre la interdependència vertical entre els tipus impositius federals i els estatals de shocks agregats al llarg del temps, utilitzant dades per als EEUU durant el període 1975 a 2006 per a benzina i tabac. Trobem una nivell significatiu de competència impositiva horitzontal, la qual és més elevada en el cas del tabac, però en cap cas reacció impositiva vertical. Els resultats són robustos al període analitzat.

Aggregate shocks or vertical tax interdependence? Evidende from gasoline and cigarettes

[cat] Besley i Rosen -1998- van ser els primers autors en estimar empíricament la rellevància de les externalitats impositives verticals. Aquests autors varen fer-ho per al cas dels impostos sobre la benzina i el tabac, en concret, per al cas dels EEUU. Ara bé, no varen tenir en compte les diferències en el nivell de vida entre Estats: àrees amb un nivell elevat paguen menys en termes reals que àrees amb un nivell de vida baix, doncs l'impost unitari sobre la benzina o sobre el tabac no difereix d'acord amb l'Estat on l'impost s'aplica. En conseqüència, proposem que la competència impositiva vertical sigui estimada deflactant totes les variables monetàries utilitzant l'anomenat "House Price Index (HPI)", el qual està disponible al nivell dels Estats. Això genera una variable impositiva federal expressada en termes reals i que presenta variació entre Estats. Aquesta estratègia empírica ens permet diferenciar entre la interdependència vertical entre els tipus impositius federals i els estatals de shocks agregats al llarg del temps, utilitzant dades per als EEUU durant el període 1975 a 2006 per a benzina i tabac. Trobem una nivell significatiu de competència impositiva horitzontal, la qual és més elevada en el cas del tabac, però en cap cas reacció impositiva vertical. Els resultats són robustos al període analitzat.

The reform of the European Energy Tax Directive reform : effect on prices

[spa] Para hacer frente a los riesgos relacionados con la contaminación atmosférica, es ampliamente aceptada la necesidad de instrumentos de política encaminados a reducir las emisiones. La intervención tiene por objeto reducir las conductas contaminantes y incentivar una conducta más respetuosa y el uso de tecnologías más eficientes. La Unión Europea cuenta con dos importantes mecanismos económicos para el control de emisiones a escala europea: la directiva sobre los impuestos energéticos, un instrumento de fiscalidad ambiental aprobado en 2003 que afecta el precio de los productos energéticos, y el sistema de comercio de los derechos de emisiones, introducido en 2005, que afecta directamente a la cantidad de emisiones de CO2. En 2011, la Comisión Europea propuso una nueva versión de la directiva sobre los impuestos energéticos. El objetivo principal de la propuesta es aumentar la eficacia del instrumento a través de una mayor presión fiscal sobre los productos energéticos y de coordinar este instrumento de fiscalidad medioambiental con el sistema de comercio de los derechos de emisiones, para establecer una señal de precio de CO2 coherente para todos los sectores. Sin embargo, en mayo de 2012 el Parlamento Europeo bloqueó la propuesta de la nueva versión del impuesto, y el proceso de actualización se detuvo. La preocupación principal parecía ser el efecto de dicha propuesta en la competitividad, en particular para los sectores que serían los más afectados dado el uso intensivo de los productos energéticos, como el sector del transporte. El objetivo de este estudio es analizar el efecto que la reforma de la directiva sobre los impuestos energéticos podría tener sobre el nivel de precios, en particular en los países de la Unión Europea donde esta reforma implicaría un aumento de los impuestos energéticos. Utilizando datos del proyecto “World Input-Output Database”, la principal conclusión es que el nuevo sistema de impuestos energéticos tendría un impacto muy bajo sobre los precios. Por lo tanto, dado que los precios no serían fuertemente afectados por la reforma, no habrá inconvenientes para la competitividad y implicaciones en términos de distribución, pero, por otro lado, este resultado también implica una baja capacidad de esta reforma para provocar cambios en el consumo y la producción hacia menos presiones ambientales.

The reform of the European Energy Tax Directive reform : effect on prices

[spa] Para hacer frente a los riesgos relacionados con la contaminación atmosférica, es ampliamente aceptada la necesidad de instrumentos de política encaminados a reducir las emisiones. La intervención tiene por objeto reducir las conductas contaminantes y incentivar una conducta más respetuosa y el uso de tecnologías más eficientes. La Unión Europea cuenta con dos importantes mecanismos económicos para el control de emisiones a escala europea: la directiva sobre los impuestos energéticos, un instrumento de fiscalidad ambiental aprobado en 2003 que afecta el precio de los productos energéticos, y el sistema de comercio de los derechos de emisiones, introducido en 2005, que afecta directamente a la cantidad de emisiones de CO2. En 2011, la Comisión Europea propuso una nueva versión de la directiva sobre los impuestos energéticos. El objetivo principal de la propuesta es aumentar la eficacia del instrumento a través de una mayor presión fiscal sobre los productos energéticos y de coordinar este instrumento de fiscalidad medioambiental con el sistema de comercio de los derechos de emisiones, para establecer una señal de precio de CO2 coherente para todos los sectores. Sin embargo, en mayo de 2012 el Parlamento Europeo bloqueó la propuesta de la nueva versión del impuesto, y el proceso de actualización se detuvo. La preocupación principal parecía ser el efecto de dicha propuesta en la competitividad, en particular para los sectores que serían los más afectados dado el uso intensivo de los productos energéticos, como el sector del transporte. El objetivo de este estudio es analizar el efecto que la reforma de la directiva sobre los impuestos energéticos podría tener sobre el nivel de precios, en particular en los países de la Unión Europea donde esta reforma implicaría un aumento de los impuestos energéticos. Utilizando datos del proyecto “World Input-Output Database”, la principal conclusión es que el nuevo sistema de impuestos energéticos tendría un impacto muy bajo sobre los precios. Por lo tanto, dado que los precios no serían fuertemente afectados por la reforma, no habrá inconvenientes para la competitividad y implicaciones en términos de distribución, pero, por otro lado, este resultado también implica una baja capacidad de esta reforma para provocar cambios en el consumo y la producción hacia menos presiones ambientales.

Tax+

Un grupo de estudiantes de la Universidad del Rosario encontró la oportunidad de iniciar un proyecto basado en la recuperación de impuestos de renta de los ciudadanos colombianos que trabajan o trabajaron en Estados Unidos, bajo el tipo de visa J1. El mercado en Colombia actualmente se encuentra constituido por aproximadamente 4.256 consumidores cuyo consumo per cápita es de $ 2.143.800 de pesos, la estrategia a utilizar para captar un nivel de clientes importante esta resguardada en el valor agregado del servicio, este pretende ofrecer un precio más bajo que la competencia incrementando la tasa de retorno de impuestos para nuestros clientes. Para iniciar, durante el primer año se espera obtener un 20% de participación en el mercado con 889 clientes, lo que conforma un promedio de 75 personas mensuales. Los pasos que se deben seguir para realizar el trámite de recuperación de impuestos son: 1) Contactar al cliente y darle la información, 2) Envió de los requisitos y formularios para que llene el cliente, 3) Devolución de los papeles diligenciados por el cliente, 4) Envió de papeles a Estados Unidos, 5) Contacto con el agente y devolución del dinero, 6) Informar al estudiante que ya está su dinero, 7) Encuesta de satisfacción. Para esto es necesario contar con un equipo conformado por un gerente general, gerente financiero, gerente de servicio al cliente y gerente comercial. La compañía estará ubicada en Bogotá, sin embargo, Tax + aspira tener un crecimiento importante en el país entrando a ciudades con una actividad importante dentro del mercado de work and travel como lo son Medellín, Cali y Barranquilla. El proyecto se iniciará con la constitución de una sociedad anónima simplificada (S.A.S.), una inversión total de $ 26.000.000 de pesos, la cual se encuentra constituida por un aporte de $ 6.500.000 pesos de cada uno de los miembros del equipo emprendedor, con esto se pretende adquirir los activos fijos y capital necesarios para iniciar el funcionamiento de la empresa. 10 Durante el primer año se espera tener unos ingresos de $ 355.600.000 de pesos, para el segundo año se pretende incrementar el número de clientes a 964, lo cual constituye unos ingresos equivalentes a $ 471.328.000 de pesos, y para el tercer año las ventas esperadas deberán alcanzar los $ 538.204.160 de pesos, que generan una rentabilidad sobre ventas del 6,31%, 0,73% y 1,6%, respectivamente. Para alcanzar el punto de equilibrio la empresa debe vender $322.083.104 al año, lo que indica que se puede alcanzar en el primer año de operación. En el primer año de operación se obtiene un flujo de efectivo de $43.272.320, en el segundo año, $5.570.581 y en el tercero $11.521.539. La tasa interna de retorno del proyecto es de 89,99% y la inversión se recupera en el tercer año de operación.

The structure of the optimal income tax in the quasi-linear model

Existing numerical characterizations of the optimal income tax have been based on a limited number of model specifications. As a result, they do not reveal which properties are general. We determine the optimal tax in the quasi-linear model under weaker assumptions than have previously been used; in particular, we remove the assumption of a lower bound on the utility of zero consumption and the need to permit negative labor incomes. A Monte Carlo analysis is then conducted in which economies are selected at random and the optimal tax function constructed. The results show that in a significant proportion of economies the marginal tax rate rises at low skills and falls at high. The average tax rate is equally likely to rise or fall with skill at low skill levels, rises in the majority of cases in the centre of the skill range, and falls at high skills. These results are consistent across all the specifications we test. We then extend the analysis to show that these results also hold for Cobb-Douglas utility.

The effects of a soft drink tax in the UK

The majority of the UK population is either overweight or obese. Health economists, nutritionists and doctors are calling for the UK to follow the example of other European countries and introduce a tax on soft drinks as a result of the perception that high intakes contribute to diet-related disease. We use a demand model estimated with household-level data on beverage purchases in the UK to investigate the effects of a tax on soft drink consumption. The model is a Quadratic Almost Ideal Demand System, and censoring is handled by applying a double hurdle. Separate models are estimated for low, moderate and high consumers to allow for a differential impact on consumption between these groups. Applying different hypothetical tax rates, we conclude that understanding the nature of substitute/complement relationships is crucial in designing an effective policy as these relationships differ between consumers depending on their consumption level. The overall impact of a soft drink tax on calorie consumption is likely to be small.

Simulating the impact on health of internalising the cost of carbon in food prices combined with a tax on sugar-sweetened beverages

Rising greenhouse gas emissions (GHGEs) have implications for health and up to 30 % of emissions globally are thought to arise from agriculture. Synergies exist between diets low in GHGEs and health however some foods have the opposite relationship, such as sugar production being a relatively low source of GHGEs. In order to address this and to further characterise a healthy sustainable diet, we model the effect on UK non-communicable disease mortality and GHGEs of internalising the social cost of carbon into the price of food alongside a 20 % tax on sugar sweetened beverages (SSBs). Developing previously published work, we simulate four tax scenarios: (A) a GHGEs tax of £2.86/tonne of CO2 equivalents (tCO2e)/100 g product on all products with emissions greater than the mean across all food groups (0.36 kgCO2e/100 g); (B) scenario A but with subsidies on foods with emissions lower than 0.36 kgCO2e/100 g such that the effect is revenue neutral; (C) scenario A but with a 20 % sales tax on SSBs; (D) scenario B but with a 20 % sales tax on SSBs. An almost ideal demand system is used to estimate price elasticities and a comparative risk assessment model is used to estimate changes to non-communicable disease mortality. We estimate that scenario A would lead to 300 deaths delayed or averted, 18,900 ktCO2e fewer GHGEs, and £3.0 billion tax revenue; scenario B, 90 deaths delayed or averted and 17,100 ktCO2e fewer GHGEs; scenario C, 1,200 deaths delayed or averted, 18,500 ktCO2e fewer GHGEs, and £3.4 billion revenue; and scenario D, 2,000 deaths delayed or averted and 16,500 ktCO2e fewer GHGEs. Deaths averted are mainly due to increased fibre and reduced fat consumption; a SSB tax reduces SSB and sugar consumption. Incorporating the social cost of carbon into the price of food has the potential to improve health, reduce GHGEs, and raise revenue. The simple addition of a tax on SSBs can mitigate negative health consequences arising from sugar being low in GHGEs. Further conflicts remain, including increased consumption of unhealthy foods such as cakes and nutrients such as salt.

Yet another reason to tax goods

The optimal taxation of goods, labor and capital income is considered in a two period model where: i) private information changes through time; ii) savings are not observed, and; iii) savings a§ect preferences conditional on the realization of types. The simultaneous appearance of these three elements cause optimal commodity taxes to depend on o§-equilibrium savings. As a consequence, separability no longer su¢ ces for the uniform taxation prescription of Atkinson and Stiglitz (AS) to obtain. If preferences are homothetic AS is partially restored: taxes are uniform within periods, however, future consumption is taxed at a higher rate than current consumption.

Testing the optimality of aggregate consumption decisions: is there rule-of-thumb behavior?

Consumption is an important macroeconomic aggregate, being about 70% of GNP. Finding sub-optimal behavior in consumption decisions casts a serious doubt on whether optimizing behavior is applicable on an economy-wide scale, which, in turn, challenge whether it is applicable at all. This paper has several contributions to the literature on consumption optimality. First, we provide a new result on the basic rule-of-thumb regression, showing that it is observational equivalent to the one obtained in a well known optimizing real-business-cycle model. Second, for rule-of-thumb tests based on the Asset-Pricing Equation, we show that the omission of the higher-order term in the log-linear approximation yields inconsistent estimates when lagged observables are used as instruments. However, these are exactly the instruments that have been traditionally used in this literature. Third, we show that nonlinear estimation of a system of N Asset-Pricing Equations can be done efficiently even if the number of asset returns (N) is high vis-a-vis the number of time-series observations (T). We argue that efficiency can be restored by aggregating returns into a single measure that fully captures intertemporal substitution. Indeed, we show that there is no reason why return aggregation cannot be performed in the nonlinear setting of the Pricing Equation, since the latter is a linear function of individual returns. This forms the basis of a new test of rule-of-thumb behavior, which can be viewed as testing for the importance of rule-of-thumb consumers when the optimizing agent holds an equally-weighted portfolio or a weighted portfolio of traded assets. Using our setup, we find no signs of either rule-of-thumb behavior for U.S. consumers or of habit-formation in consumption decisions in econometric tests. Indeed, we show that the simple representative agent model with a CRRA utility is able to explain the time series data on consumption and aggregate returns. There, the intertemporal discount factor is significant and ranges from 0.956 to 0.969 while the relative risk-aversion coefficient is precisely estimated ranging from 0.829 to 1.126. There is no evidence of rejection in over-identifying-restriction tests.

Sacrifice and efficiency of the income tax schedule

We investigate the efficiency of equal sacrifice tax schedules in an economy which primitives are exactly those in Mirrlees (1971): a continuum of individuals with identical preferences defined over consumption and leisure who differ with respect to their labor market productivity. Using a separable specification for preferences we derive the minimum equal sacrifice allocation and recover the tax schedule that implements it. The separable specification allows us to use the methodology developed by Werning (2007b) to check whether the schedule is efficient, that is, whether there is no alternative tax schedule that raises more revenue while delivering less utility to no one. We find that inefficiency does not arise for most parametrizations we use to approximate the US economy. For the few cases for which inefficiency does arise, it does so only for very high levels of income and marginal tax rates.

Full Cups, Full Coffers: Tax Strategies and Consumer Culture in the Early Modern German Cities

During the sixteenth and seventeenth centuries, the excise taxes (Ungeld) paid by town residents on the consumption of beer, wine, mead and brandy represented the single most important source of civic revenue for many German cities. In a crisis, these taxes could spike to 70-80% of civic income. This paper examines civic budgets and 'behind-the-scenes' deliberations in a sample of towns in southern Germany in order to illuminate how decisions affecting consumer taxes were made. Even during the sobriety movements of the Reformation and post-Reformation period, tax income from drinkers remained attractive to city leaders because the bulk of the excise tax burden could easily be shifted away from privileged members of society and placed on the population at large. At the same time, governments had to maintain a careful balance between what they needed in order to govern and what the consumer market could bear, for high taxes on drinks were also targeted in many popular revolts. This led to nimble politicking by those responsible for tax decisions. Drink taxes were introduced, raised, lowered and otherwise manipulated based not only on shifting fashions and tastes but also on the degree of economic stress faced by the community. Where civic rulers were successful in striking the right balance, the rewards were considerable. The income from drink sales was a major factor in how the cities of the Empire survived the wars and other crises of the early modern period without going into so much debt that they lost their independence.

Full Cups, Full Coffers: Tax Strategies and Consumer Culture in the Early Modern German Cities

During the sixteenth and seventeenth centuries, the excise taxes (Ungeld) paid by town residents on the consumption of beer, wine, mead and brandy represented the single most important source of civic revenue for many German cities. In a crisis, these taxes could spike to 70–80% of civic income. This paper examines civic budgets and ‘behind-the-scenes’ deliberations in a sample of towns in southern Germany in order to illuminate how decisions affecting consumer taxes were made. Even during the sobriety movements of the Reformation and post-Reformation period, tax income from drinkers remained attractive to city leaders because the bulk of the excise tax burden could easily be shifted away from privileged members of society and placed on the population at large. At the same time, governments had to maintain a careful balance between what they needed in order to govern and what the consumer market could bear, for high taxes on drinks were also targeted in many popular revolts. This led to nimble politicking by those responsible for tax decisions. Drink taxes were introduced, raised, lowered and otherwise manipulated based not only on shifting fashions and tastes but also on the degree of economic stress faced by the community. Where civic rulers were successful in striking the right balance, the rewards were considerable. The income from drink sales was a major factor in how the cities of the Empire survived the wars and other crises of the early modern period without going into so much debt that they lost their independence.