Are two tax rates better than one?

Abstract: Should two–band income taxes be progressive given a general income distribution? We provide a negative answer under utilitarian and max-min welfare functions. While this result clarifies some ambiguities in the literature, it does not rule out progressive taxes in general. If we maximize total or weighted utility of the poor, as often intended by the society, progressive taxes can be justified, especially when the ‘rich’ are very rich. Under these objectives we obtain new necessary conditions for progressive taxes, which only depend on aggregate features of income distributions. The validity of these conditions is examined using plausible income distributions.

The Optimal Distribution of the Tax Burden over the Business Cycle

This paper analyses optimal income taxes over the business cycle under a balanced-budget restriction, for low, middle and high income households. A model incorporating capital-skill complementarity in production and differential access to capital and labour markets is developed to capture the cyclical characteristics of the US economy, as well as the empirical observations on wage (skill premium) and wealth inequality. We .nd that the tax rate for high income agents is optimally the least volatile and the tax rate for low income agents the least countercyclical. In contrast, the path of optimal taxes for the middle income group is found to be very volatile and counter-cyclical. We further find that the optimal response to output-enhancing capital equipment technology and spending cuts is to increase the progressivity of income taxes. Finally, in response to positive TFP shocks, taxation becomes more progressive after about two years.

Competition for FDI and profit shifting: On the effects of subsidies and tax breaks

We investigate competition for FDI within a region when a foreign multinational rm can profitably exploit differences in statutory corporate tax rates by shifting taxable pro ts to lower-tax jurisdictions. In such framework we show that targeted tax competition may lead to higher welfare for the region as a whole than lump-sum subsidies when the difference in statutory corporate tax rates and/or their average is high enough. Tax competition is also preferable from an efficiency point of view (overall surplus) by changing the firm's investment decision when pro t shifting motivations induce the rm to locate in the (before tax) least pro table country.

Tax evasion, technology shocks, and the cyclicality of government revenues

This paper analyzes the behavior of the tax revenue to output ratio over the business cycle. In order to replicate the empirical evidence, we develop a simple model combining the standard Ak growth model with the tax evasion phenomenon. When individuals conceal part of their true income from the tax authority, they face the risk of being audited and hence of paying the corresponding fine. Under the empirically plausible assumptions that the intertemporal elasticity of substitution exhibits a sufficiently small value and that productivity shocks are serially correlated, we show that the elasticity of government revenue with respect to output is larger than one, which agrees with the empirical evidence. This result holds even if the tax system displays flat tax rates. We extend the previous setup to generate larger fiscal deficits when the economy experiences a recession.

A Carbon Tax for Ireland

The Programme for Government 2007-2012 states that '[a]ppropriate fiscal instruments, including a carbon levy, will be phased in on a revenue-neutral basis over the lifetime of this Government.' The terms of reference of the Commission on Taxation repeats the commitment to introduce measures to further lower carbon emissions and to phase in on a revenue neutral basis appropriate fiscal measures including a carbon levy over the lifetime of the Government and invites the Commission to [i]nvestigate fiscal measures to protect and enhance the environment including the introduction of a carbon tax. This paper presents thoughts and considerations about such a carbon tax. It discusses selected design issues, and presents a preliminary impact assessment for what the authors think is a reasonable design. More specifically, It addresses ten questions: 1. Why impose a carbon tax? 2. What level should the tax be? 3. Who should be taxed? 4. What is the expected revenue? 5. What to do with the revenue? 6. What are the macro-economic implications? 7. What are the effects on emissions? 8. What are the effects on income distribution? 9. How to tax internationally traded goods and services? 10. What about fuel tourism? On some of these questions, it presents arguments and evidence. Other questions call for further research. Aspects of some questions can only be answered by the Dail �ireann.This resource was contributed by The National Documentation Centre on Drug Use.

Executive Summary 2007 Iowa Tax Amnesty, 2008

Results of Iowa Tax Amnesty 2007

The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia

We use a panel of manufacturing plants from Colombia to analyze how the risein payroll tax rates over the 1980 s and 1990 s affected the labor market.Our estimates indicate that formal wages fall by between 1.4% and 2.3% as aresult of a 10% rise in payroll taxes. This 'less-than-full-shifting' islikely to be the result of weak linkages between benefits and taxes and thepresence of downward wage rigidities induced by a binding minimum wage inColombia. Because the costs of taxation are only partly shifted fromemployers to employees, employment should also fall. Our results indicatethat a 10% increase in payroll taxes lowered formal employment by between4% and 5%. In addition, we find less shifting and larger disemploymenteffects for production than non-production workers. These results suggestthat policies aimed at boosting the relative demand of low-skill workers byreducing social security taxes on those with low earnings may be effectivein a country like Colombia, especially if tax cuts are targeted to indirectbenefits.

Tax simulation in the SHP

This paper describes a simulation package designed to estimate the annual income taxes paid by respondents of the Swiss Household Panel (SHP). In Switzerland, the 26 cantons have their own tax system. Additionally, tax levels vary between the over 2000 municipalities and over time. The simulation package takes account of this complexity by building on existing tables on tax levels which are provided by the Swiss Federal Tax Administration Office. Because these are limited to a few types of households and only 812 municipalities, they have to be extended to cover all households and municipalities. A further drawback of these tables is that they neglect several deductions. The tax simulation package fills this gap by taking additionally account of deductions for children, double-earner couples, third pillar and support for dependent persons according to cantonal legislation. The resulting variable on direct taxes not only serves to calculate household income net of taxes, but can also be a variable for analysis by its own account.

Iowa Tax Expenditures Report 2005

Exemptions, exclusions, credits against tax and reductions in tax base that are tied to specific provisions in tax law; estimation of the annual dollar effect for each of those provisions.

Tax Credit Evaluation Study: Historic Preservation and Cultural and Entertainment District Tax Credit, March 2009

During the 2005 Legislative Session the Iowa Department of Revenue received an appropriation to establish the Tax Credits Tracking and Analysis Program (TCTAP) to track tax credit awards and claims. In addition, the Department was directed to perform periodic evaluations of tax credit programs. The purpose of these studies is three-fold: (1) To provide a comparison of the Iowa tax credit program to similar federal and other states’ programs (2) To summarize information related to the usage of the Iowa tax credit (3) To evaluate the economic impact of the tax credit program.

Tax Credit Evaluation Study: Iowa’s Biofuel Retailers’ Tax Credits, February 2009

During the 2005 Legislative Session the Iowa Department of Revenue received an appropriation to establish the Tax Credits Tracking and Analysis Program (TCTAP) to track tax credit awards and claims. In addition, the Department was directed to perform periodic evaluations of tax credit programs. The purpose of these studies is three-fold: (1) To provide a comparison of the Iowa tax credit program to similar federal and other states’ programs (2) To summarize information related to the usage of the Iowa tax credit (3) To evaluate the economic impact of the tax credit program.

Tax Credit Evaluation Study: Tax Incentive Programs Used by Biofuel Producers, March 2009

During the 2005 Legislative Session the Iowa Department of Revenue received an appropriation to establish the Tax Credits Tracking and Analysis Program (TCTAP) to track tax credit awards and claims. In addition, the Department was directed to perform periodic evaluations of tax credit programs. The purpose of these studies is three-fold: (1) To provide a comparison of the Iowa tax credit program to similar federal and other states’ programs (2) To summarize information related to the usage of the Iowa tax credit (3) To evaluate the economic impact of the tax credit program.

Tax Credit Evaluation Study: Research Activities Tax Credit, January 2008

During the 2005 Legislative Session the Iowa Department of Revenue received an appropriation to establish the Tax Credits Tracking and Analysis Program (TCTAP) to track tax credit awards and claims. In addition, the Department was directed to perform periodic evaluations of tax credit programs. The purpose of these studies is three-fold: (1) To provide a comparison of the Iowa tax credit program to similar federal and other states’ programs (2) To summarize information related to the usage of the Iowa tax credit (3) To evaluate the economic impact of the tax credit program.

Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials?

Recent theoretical work in economic geography has shown that agglomeration forces can mitigate 'race-to-the-bottom' tax competition, by partly or fully offsetting firms' sensitivity to tax differentials. We test this proposition using data on firm births across Swiss municipalities. We find that corporate taxes deter firm births less in more spatially concentrated sectors. Firms in sectors with an agglomeration intensity in the top quintile are less than half as responsive to differences in corporate tax burdens as firms in sectors with an agglomeration intensity in the bottom quintile. Hence, agglomeration economies do appear to attenuate the impact of tax differentials on firms' location choices.

Tax Credits Contingent Liabilities Brief December 8, 2006

The Tax Credits Contingent Liabilities Report was created by the Tax Research and Program Analysis Section of the Iowa Department of Revenue (IDR) for the benefit of the Revenue Estimating Conference (REC). This report is part of the Tax Credits Tracking and Analysis Program. The goal of the program is to provide a repository for information concerning the awarding, usage, and effectiveness of tax credits. This report forecasts tax credit claims assuming that all available awarded credits are issued and then, along with forecasted credits, are subsequently claimed.