Personal Income Tax Research Papers (original) (raw)

2008, Health Economics

The 1998 Spanish reform of the Personal Income Tax eliminated the 15% deduction for private medical expenditures including payments on private health insurance (PHI) policies. To avoid an undesirable increase in the demand for publicly funded health care, tax incentives to buy PHI were not completely removed but basically shifted from individual to group employer-paid policies. In a unique fiscal experiment, at the same time that the tax relief for individually purchased policies was abolished, the government provided for tax allowances on policies taken out through employment. Using a bivariate probit model on data from National Health Surveys, we estimate the impact of said reform on the demand for PHI and the changes occurred within it. Our findings suggest that the total probability of buying PHI was not significantly affected.

2005

In 2001, Russia dramatically reduced its higher rates of personal income tax (PIT), establishing a single marginal rate at the low level of 13%. In the following year, real revenue from the PIT increased by about 26%. This 'flat tax' experience has attracted much attention (and emulation), making it perhaps the most important tax reform of recent years. But it has been little studied. This paper asks whether the strong performance of PIT revenue was itself a consequence of this reform, using both macro evidence and, in particular, micro level data on the experiences of individuals and households affected by the reform to varying degrees. It concludes that there is no evidence of a strong supply side effect of the reform. Compliance, however, does appear to have improved quite substantially-by about one third, according to our estimates-though it remains unclear whether this was due to the parametric tax reform or to accompanying changes in enforcement.

2000, Journal of Labor Economics

2009, German Economic Review

Tax competition is discussed as a source of inefficiency in international taxation and in fiscal federalism. Two preconditions for the existence of such effects of tax competition are that mobile factors locate or reside in jurisdictions with -ceteris paribus -lower tax rates and that taxes are actually set strategically in order to attract mobile production factors. It is well known from studies about Swiss cantonal and local income tax competition that Swiss taxpayers reside where income taxes are low. In this paper, empirical results on strategic tax setting by cantonal governments are presented for a panel of the Swiss cantons from 1984 to 1999. Completing the evidence on Swiss tax competition, the income tax rates in cantons are lower, the lower the tax rates of their neighbors. JEL Code: H71, H73, H24. This version April 15, 2005 -This project has been started while the second author visited the University of St. Gallen. Financial support from the University of Rennes 1 (France) and the hospitality of the University of St. Gallen are gratefully acknowledged.

2000

Tax competition is supposed to lead to inefficiencies in the provision of public goods and difficulties for decentralized redistribution. A necessary condition for these effects to occur is that residence and location decisions are... more

2005, Regional Science and Urban Economics

This paper analyzes the implications of foreign firm ownership and international profit shifting through thin capitalization for corporate tax policy. We consider a model of interjurisdictional tax competition where the corporate tax serves as a backstop to the personal income tax, interest on debt is deductible from the corporate tax base and multinational firms may shift profit across countries through thin capitalization. We show that the problem of thin capitalization induces countries to reduce their corporate tax rates below the personal income tax rate and to broaden their tax bases. Moreover, foreign firm ownership leads to a reduction in corporate tax rates. We also show that there is scope for welfare enhancing tax coordination in our model. In the presence of both foreign firm ownership and thin capitalization, countries gain from a coordinated increase in corporate tax rates or from a coordinated broadening of the tax base.

1981, American Economic …

This paper presents estimates of static and dynamic general equilibrium resource alloca-tion effects for four alternative plans for corporate and personal income tax integra-tion in the United States. A medium-scale numerical general... more

2008, Public Budgeting & Finance

This paper reviews the literature and evidence on the most appropriate structure of regional and local taxes in developing countries. A good subnational tax system is critical to an effective and sustainable system of intergovernmental fiscal relations -a need that has become increasingly important around the world as more and more public services are being delivered through subnational governments. In most developing countries potentially sound and productive taxes exist that are suitable for regional and local governments: property taxes, taxes on motor vehicles, surcharges on national personal income taxes, payroll taxes, and even, in some cases, regional value added taxes and properly designed local business taxes.

2009, Clinical Infectious …

Streptococcus pneumoniae infection is recognized as a global priority public health problem, and conjugate vaccines have been shown to prevent vaccine-type invasive pneumococcal disease (IPD) in children. However, better estimates of the disease burden and reliable population-based data on serotype composition are needed for vaccine development and implementation in developing countries.

2006, International Tax and Public Finance

This paper examines the taxation of capital income in a small open economy that faces a highly elastic supply of internationally mobile capital and increasing tax competition. The analysis considers a wide variety of additional factors that affect the determination of capital income taxation policy, including the desire to tax economic rents earned by foreign and domestic firms, the desire

2003, Journal of Public Economics

2019, Economy of Industry

The paper presents a brief analysis of theoretical and practical aspects of state regulation of the personal income taxation to stimulate the formation of STEM staff. The research was conducted in the context of the development of the Smart Industry in Ukraine.It is defined, that the main driver of the Smart Industry is STEM staff, armed with digital skills. The rapid development of technologies requires constant skills renewal. This leads to the need for the lifelong learning concept implementation. A personal income tax could stimulate staff to invest in their education.We investigate the world theoretical concepts of income taxation. It was concluded, that it is a combination of the tax base, rates and reliefs that can serve as a tool to stimulate investment in education.The experience of foreign countries with different tax systems, corresponding to theoretical concepts of income taxation, was analyzed. The results of the analysis showed that the most effective instrument of personal income tax in foreign countries is tax reliefs on education. In addition, in advanced countries government programs and the public-private partnerships have a significant impact on stimulating the development of STEM staff.The Ukrainian tax system and its possibilities to stimulate the formation of STEM staff were investigated. The analysis revealed that there are few tax reliefs on education, government programs are not developed and the system of public-private partnership is imperfect. The formation of STEM staff is at the initial legislative stage, and so far measures taken concerned its introduction at the level of general secondary education.On the basis of theoretical principles and analysis of foreign experience we proposed recommendations on the state regulation of the formation and development of STEM staff in Ukraine. They are based on the reform of the personal income taxation under the current income tax and the introduction of a tax on the withdrawn capital, cancelling the taxation of individuals’ dividends. The main incentive measures for STEM education are supposed to be privileges and preferences on personal income tax in case of education expenses with the additional implementation of government programs and the establishment of partnerships between government and business.

2000, SSRN Electronic Journal

This paper provides a theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of taxes and corporate governance. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. We find that higher personal income tax rates favor incorporation while higher corporate tax rates reduce the probability to incorporate. These findings are robust to the inclusion of other economic and institutional determinants of external financing and choice of organizational form.

1996, Journal of Banking & Finance

This paper provides empirical evidence on the simultaneous effects of both corporation and personal income taxes on dividend payment adjustments and on the behaviour of share prices on the ex-dividend dates. The results show that companies set their dividend policies to minimise their tax liability and to maximise the after-tax return of their shareholders. In particular, firms that are unable to deduct the advanced corporation tax from their tax liability are found to pay low dividends. In addition, consistent with the tax hypothesis, we find that the differential taxation of dividends and capital gains results in a decrease in ex-day share prices by significantly less than the amount of the dividend. There is no evidence of a tax-induced dividend clientele.

2001, Nber/tax Policy and The Economy

This paper investigates the effect of entrepreneurs' personal income tax situations on the growth rates of their enterprises. We analyze the personal income tax returns of a large number of sole proprietors before and after the Tax Reform Act of 1986 and determine how the substantial reductions in marginal tax rates associated with that law affected the growth of their firms as measured by gross receipts. We find that individual income taxes exert a statistically and quantitatively significant influence on firm growth rates. Raising the sole proprietor's tax price (one

2007, Decentralizing governance: emerging concepts and …

1985, Journal of Monetary Economics

2012, International Tax and Public Finance

Political constraints and incentives are the true driver of tax reforms. This paper reviews the political economics literature on personal income tax systems and reforms to see how political mechanisms help explain tax reforms. We take some of the implications of these theories to the data using LABREF, a database that identifies labor tax reforms in the European Union for the period 2000-2007, and control for economic and labor market factors. We find that political variables carry more weight than economic variables, and we show empirical regularities that support political economy theories. We also find that governments tended to reform more in better economic times, engaging in pro-cyclical behavior.

2002, International Tax and Public Finance

In a decentralised tax system, the effects of tax policies enacted by one government are not confined to its own jurisdiction. First, if both the regional and the federal levels of government co-occupy the same fields of taxation, tax rate increases by one layer of government will reduce taxes collected by the other. Second, if the tax base is mobile, tax rate increases by one regional government will raise the amount of taxes collected by other regional governments. These sources of fiscal interdependence are called in the literature vertical and horizontal tax externalities, respectively. Third, as Smart shows, if equalisation transfers are present, an increase in the standard equalisation tax rate provides incentives to raise taxes to the receiving provinces. A way to check the empirical relevance of these hypotheses is to test for the existence of interactions between the regional tax rate, on the one hand, and the federal tax rate, the tax rate set by competing regions, and the standard equalisation tax rate, on the other hand. Following this approach, this paper estimates provincial tax setting functions with data on Canadian personal income taxation for the period 1982-1996. We find a significant positive response of provincial tax rates to changes in the federal income tax rate, the tax rates of competing provinces, and the standard equalisation rate (only for receiving provinces). We also find that the reaction to horizontal competition is stronger in the provinces that do not receive equalisation transfers.

2004, Australian Journal of Political Science

One of the most striking trends in corporate taxation over the past two decades has been the sustained fall in corporate tax rates. Most of the recent literature argues that the main cause of this trend is changing policy beliefs and objectives held by domestic elites, and that the consequences are minor because tax rate cuts have been compensated by a broadening of the corporate tax base. Focusing on Australian income tax reform in the 1980s and 1990s, the article both complements and challenges the literature by establishing three empirical facts. First, corporate tax competition was the crucial driving force behind corporate tax cuts. Second, and related, Australian policymakers continued to embrace investment incentives such as generous depreciation allowances as pragmatic ways to increase the level of investment, at a particular level of taxation. However, with increasing competitive pressure on the corporate tax rate, policymakers had to trade off fewer investment incentives against a more competitive corporate tax regime. Finally, competitive corporate tax cuts put pressure on income taxation as a whole, because low corporate rates provide opportunities for high-income taxpayers to avoid taxes which the high-rate corporate tax regime had successfully prevented. Indirectly, therefore, corporate tax competition led to far-reaching rate cuts in personal income taxation. The article analyses how governments in Australia dealt with the tradeoffs created by corporate tax competition and discusses the likely consequences of continuous tax competition.

2007

Labor force participation rates of mothers in Austria and Germany are similar, however full-time employment rates are much higher among Austrian mothers. In order to find out to what extent these differences can be attributed to differences in the tax transfersystem, we perform a comparative micro simulation exercise. After estimating structural labor supply models of both countries, we interchange two

2006, The South African Journal of Economics

In reforming South Africa's personal income tax system, the Katz Commission relied heavily on equality and the constitution. It did not, however, explain its understanding of the meaning of equality in general or equality of taxation in particular, being content merely to mechanically remove what it perceived to be discriminatory words in the legislation. The meaning of equality of taxation on the other hand, was thoroughly debated by the classical economists. This article explains the classical economists' meaning of equality of taxation and demonstrates that the classical system of equality and that achieved by implementing the Katz Commission's recommendations are vastly different. In particular lower income groups, single income households and families are considerably worse off. Copyright (c) 2006 The Author. Journal compilation (c) 2006 Economic Society of South Africa.

2013, German Economic Review

We exploit a dataset that includes the individual tax returns of all taxpayers in the top percentile of the income distribution in Germany to pin down the effective income taxation of households with very high incomes. Taking tax base erosion into account, we find that the top percentile of the income distribution pays an effective average tax rate of 30.5% and contributes more than a quarter of total income tax revenue. Within the top percentile, the effective average tax rate is first increasing, then decreasing, with income. Since the 1990s, effective average tax rates for the German super-rich have fallen by about a third, with major reductions occurring in the wake of the personal income tax reform of 2001-05. As a result, the concentration of net incomes at the very top of the distribution has strongly increased in Germany.

1999, International Tax and Public Finance

The purpose of this paper is to investigate to what extent modifications of tax systems between 1985 and 1992 within major parts of the European Union contributed to changes in the labour market. The principal countries under investigation are Germany, Italy, France and the United Kingdom, and the method of investigation is the numerical simulation of a multi-country general equilibrium model. Changes in VAT rates and in the personal income tax schedule are investigated. We conclude that a non-trivial part of the labour market changes may be due to reactions of the market to changes in these tax rates.

2003, Atlantic Economic Journal

Using error-correction model (ECM) estimation, the paper empirically examines the causality relationship between the federal government budget deficit and the ex ante real interest rate yield on high grade long term tax free municipal bonds in the U.S. To clarify this deficit or interest rate relationship, the budget deficit is measured by the primary budget deficit, which excludes net interest payments by the Treasury. In a model that includes federal personal income tax rates and net international capital flows, as well as money supply growth, the ECM estimates strongly suggest a bi-directional relationship between the primary budget deficit and the ex ante real interest rate yield. Budget deficits apparently do matter! William Simon's concerns were justified. (JEL H61, H62, H69, E43, E62); Atlantic Econ. J., 31(3): pp. 255-265, Sept. 03. c°All Rights Reserved * Armstrong Atlantic State University-U.S.A. The author is indebted to P. A. V. B. Swamy for ideas and helpful suggestions and Will Perry for data assembly and processing.

In this paper I estimate under-assessment of incomes in the Personal Income Tax during the years following its introduction in Spain. The methodology combines an analysis of discrepancy with National Accounts and an econometric exercise,... more

2014

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.

2005, Journal of Asian Economics

We argue that tax policy in Japan is on a shaky empirical ground. First, until recently, no serious attempts had been made to estimate labour responses to taxation, especially with respect to prime-age male workers. Second, while there is some stock of empirical analysis on labour supply response of female workers, few studies have appropriately allowed for the budget constraint structure implied by the tax system. Third, as a corollary, there is not a reliable stock of empirical estimates to quantify the frequently employed concepts of "disincentives to work"or "distortion."Forth, despite this paucity of empirical estimates, there are a number of tax simulation studies, most of which are relied on arbitrary sets of labor response elasticities and other related parameter values. Given this state of the literature, we introduce our estimates, and calculate the degree of distortion using the concept of the marginal cost of public funds.

2008, The Economics of Transition

In this paper we use data from a large nationally representative survey in Russia to analyze the distributional and welfare implications of the military draft. We focus on draft avoidance as a common response to highly unpopular conscription system ridden by corruption. We develop a simple theoretical model that describes household compliance decisions with respect to enlistment. We employ several econometric techniques to estimate the effect of various household characteristics on the probability to serve in the army and the implications for household income. Our results indicate that the burden of conscription falls disproportionately on the poor. Poor, low-educated, rural households are much more likely to have their sons enlisted compared to urban, wealthy and bettereducated families. The losses incurred by the poor are disproportionately large and exceed the statutory rates of personal income taxes. JEL: D12, I32, J31

1996, International Tax and Public Finance

Usually, only initial revenue effects of personal income tax reforms are considered. However, a tax reform characterized by base broadening in exchange for rate reduction can reduce the income elasticity of tax revenue. In that case, the increase in revenue after income growth will be relatively smaller: the tax reform has a negative effect on revenue in the second period. Using the microtax model of the Central Planning Bureau we simulated the effects of the Dutch "Oort" reform 1990 on revenue elasticities and, consequently, on tax revenue. The income tax revenue elasticity declined by 17 percent which caused an additional revenue loss of 0.6 percent in 1990, rising to 3.8 percent in 1993.

2006, Public goods, environmental …

The purpose of this paper is to test econometrically the existence of fiscal interactions between Belgian municipalities. At the time of writing, the motivation was to provide scientific support to the lively debate on fiscal competition... more

2003, Journal of Public Economics

2005, Public Finance Review

El trabajo propone y evalúa, en un marco de bienestar social à la Atkinson y Bourguignon (1987), un modelo de descentralización del impuesto sobre la renta personal, consistente con el modelo de redistribución óptima de Tresch (2002). Cada región aplica a sus residentes un impuesto progresivo y el gobierno central establece un recargo (o deducción) proporcional a la renta de los individuos, neta del respectivo impuesto regional. Se ofrecen las condiciones que permiten recomendar este modelo de descentralización en términos de reducción de la desigualdad y aumento del bienestar social, tanto para cada región como globalmente. Como ilustración, se realizan varios ejercicios de microsimulación empleando como referencia el IRPF español.

2012, Post-Communist Economies

Slovenia belongs to a group of EU member states that have reduced their personal income tax burden during the current financial and economic crisis. The latest changes, introduced in the personal income tax system during the last two years, have primarily reduced the tax burden on low-income taxpayers. However, this was only the last step in a series of personal income tax reforms since 2004 that have on average reduced the tax burden on all taxpayers. Using an exclusive database of taxpayers and utilising a general-equilibrium modelling platform, we assess the consequences of these reforms at both the micro and the macro level. From a macroeconomic point of view, the initial positive consequences of higher private consumption and welfare are declining over time due the increased budget deficit and reduced investment.

2004, Public Budgeting & Finance

2014, Empirical Economics

The paper studies how high-income taxpayers responded to the introduction of the “extraordinary tax on individuals” in Hungary in 2007. The study is based on a panel of tax returns containing information on 10 % of tax filers from 2005 and three subsequent years. We estimate the elasticity of taxable income with respect to the marginal net-of-tax rate and find that the taxable income of Hungarian high earners is moderately responsive to taxation: the estimated elasticity is about 0.24. We also find evidence for a sizeable income effect. The estimated effect is not caused by income shifting.

2001

El objetivo de este artículo es analizar las implicaciones de la reciente reforma del impuesto sobre la renta personal español (IRPF) en relación con la distribución de la renta. Adicionalmente, el trabajo ofrece una evaluación comparativa en términos de bienestar social para el IRPF previo y el posterior a la reforma. El análisis empírico consiste en un ejercicio de simulación de ambos diseños impositivos, realizado a partir de los microdatos contenidos en el Panel de Declarantes por IRPF del Instituto de Estudios Fiscales.

2009, Empirica

Using official statistics and tax laws, we outline and discuss the evolution of the personal income tax in Austria since the beginning of the Second Republic in 1955. Focussing on the tax tariff and its progressivity properties, we identify a period of high (and increasing) progressivity before 1989, followed by a period of diminished progressivity since 1989. While still being a powerful revenue instrument, the Austrian income tax seems to have lost both redistributive impact and political allure.

1994, Population Research and Policy Review

The impact of the personal income tax dependent exemption, abortion availability, and other factors on fertility rates is analyzed. US time series data for 1915-88 are used in the empirical model. The results indicate that greater abortion availability in the USA is associated with lower fertility. A higher value of the dependent exemption generally is associated with higher fertility, but the magnitude and significance of the effect is sensitive to specification choice. The results suggest that restricting abortion availabiIity in the USA wilt increase the fertility rate, but a change in the tax value of the dependent exemption will have a less predictable impact on fertility.

1993, Journal of Policy Analysis and Management

ABSTRACT The progressivity and equity of both state and federal individual income taxes, as well as the combined system of both taxes, are examined before and after the federal Tax Reform Act of 1986 using a variety of measures applied to federal Statistics of Income individual income tax data; state taxes are calculated using TAXSIM. Our findings are as follows: First, in both 1985 and 1987, state personal income taxes were generally less progressive and more horizontally equitable than the federal system. Second, in moving from 1985 to 1987, state personal income tax systems generally displayed decreased progressivity and horizontal inequity. The combination of the two systems displayed generally lower progressivity and horizontal equity scores when we compare 1987 to 1985. Last, the after-tax income distribution became more unequal when we compared 1987 to 1985.

2001

We investigate the influence of public policy on interregional migration in Canada using new interprovincial migration data constructed from personal income tax files for the years 1974 to 1996. We consider the consequences for gross and net migration flows of regional variation in employment insurance, provincial social assistance, personal income taxes and public spending of different types, and we compare the effects of these policies to the impacts on migration of wages, employment prospects and moving costs. We also conduct a preliminary investigation of the migration consequences of certain extraordinary political events in Quebec and of the closing of the cod fishery in Newfoundland.

2004, Public Budgeting <html_ent glyph="@amp;" ascii="&"/> Finance

The state and local tax treatment of the elderly varies significantly from state to state. In this article, we analyze the differences in effective tax rates for the state personal income tax for elderly versus non-elderly taxpayers. We find that in a majority of states, the average effective tax rate facing the elderly is significantly lower than that of non-elderly taxpayers. The consequences of this tax rate difference may impact long-term state income tax revenues as the elderly population continues to grow.

2011

Personal income taxation remains relatively low in many developing countries despite recent democratic advancement and rapid economic growth; this is hard to reconcile with standard political economy models of taxation. This paper argues that the details of political institutions help to explain these low levels of personal income taxation. In particular, legislative malapportionment enables rich elites to have disproportionate political

2006, European Journal of Finance

We extend the WACC approach to a tax system having a firm income tax and a personal income tax of the investor as well. We use an artifical tax system incorporating most of the G-7 national tax codes as for example the classical or the... more

2007

The role of indirect taxes in social policy is investigated by 1) comparing the distributional pattern of indirect taxes with the one of personal income taxes and social security contributions; 2) calculating the indirect tax liabilities for recipients of social benefits; 3) assessing the distributional impact of shifting the financing of social security from contributions to indirect taxes. For this

2002

In this paper we investigate the progressivity impact of various components of the Belgian personal income tax system, before and after a major reform of this system. The reform reduced the top tax rates, broadened the tax base and increased tax credits. We show that, contrary to the opinion, commonly expressed in public debates, the reform did not reduce aggregate