Tax Credits (tax + credit)

Distribution by Scientific Domains

Kinds of Tax Credits

  • earned income tax credit
  • income tax credit

  • Selected Abstracts

    The Labour Market Impact of the Working Families' Tax Credit

    FISCAL STUDIES, Issue 1 2000
    Abstract In October 1999, the working families' tax credit (WFTC) replaced family credit as the main package of in-work support for families with children. Among a range of stated aims, the WFTC is intended to,, improve work incentives, encouraging people without work to move into employment'. In this paper, we consider the impact of WFTC on hours and participation. To simulate labour supply responses, we use a discrete behavioural model of household labour supply with controls for fixed and childcare costs, and unobserved heterogeneity. In simulation, we experiment with a number of scenarios regarding the take-up of the credit, entry wage level and hourly childcare price. We find participation rates among single mothers to increase by around 2.2 percentage points for the base-case scenario, while for married women participation rates are modelled to fall. Our simulation results indicate a small increase in overall participation of around 30,000 individuals. [source]

    The Value of Imputation Tax Credits on Australian Hybrid Securities

    ABSTRACT Hybrid securities are becoming an increasingly important component of the capital structure of Australian firms. While displaying characteristics of both debt and equity, one principal equity attribute of hybrids is their ability to pay franked dividends. This enables resident domestic investors to claim corporate tax payments as a credit against personal tax obligations under Australia's dividend imputation tax system. This paper estimates a value for the ,franking credits' that attach to hybrid securities by examining stock price changes around ex-dividend dates. We add to the literature that examines the ex-day price changes of ordinary shares (OS) in that the hybrid securities we examine have high dividend yields and are relatively insensitive to market movements. Therefore the signal-to-noise ratio is much higher than for OS. Our analysis reveals that cum-dividend day prices on hybrid securities do not include any value for franking credits. This result is consistent with the notion that the price-setting investor in the Australian market is a foreign investor who places no value on franking credits. [source]

    Tax credits, insurance, and the use of medical care

    Michael Smart
    Little is known about the effects of such tax measures on individual behaviour, in contrast to the extensive research on the tax exemption for employer-provided health insurance. In this paper, we exploit variation in the after-tax cost of health expenditures under the tax law to estimate the tax price elasticity of demand for prescription drugs, health insurance, and other eligible expenditures. We find evidence of moderate to large tax price elasticities, compared with traditional point-of-service price elasticity estimates , despite the apparent differences in the way tax subsidies are experienced by consumers. In contrast, we find no evidence the tax subsidy affects demand for health insurance on the intensive margin, which we show is consistent with the theory of optimal self-insurance. We discuss the implications of our results for recent proposals to reform public and private health insurance systems. JEL classification: I1, H2 Crédits d'impôt, assurance et l'utilisation des soins médicaux., Les systèmes d'impôt sur le revenu des particuliers au Canada, aux Etats-Unis et ailleurs permettent des déductions ou crédits d'impôt pour les dépenses directes en soins de santé assumées par les particuliers ou pour les primes d'assurance privée. On connaît mal les effets de ces mesures fiscales sur le comportement des personnes par comparaison avec les résultats extensifs de la recherche sur les effets des exemptions fiscales pour l'assurance santé fournie par les employeurs. Dans ce texte, on utilise la variation dans le fardeau des dépenses pour la santé après impôt selon les diverses juridictions pour évaluer l'élasticité de la demande de médicaments d'ordonnance, de l'assurance santé, et d'autres dépenses éligibles en réponse à des différences de prix fiscaux. On découvre que l'ordre de grandeur des élasticité se situe entre modérée et grande quand on les compare aux évaluations des élasticités traditionnelles de la demande aux points de service par rapport aux prix , et ce malgré les différences apparentes dans les expériences de ces subventions fiscales pour les consommateurs. D'autre part, on ne trouve pas de support pour l'hypothèse que les subventions fiscales affectent la demande d'assurance santéà la marge intensive , ce qui concorde bien avec ce que nous enseigne la théorie de l'auto-assurance optimale. On discute les implications de ces résultats pour certaines réformes récentes proposées aux systèmes d'assurance santé privés et publics. [source]

    Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988,

    FISCAL STUDIES, Issue 3 2007
    Thomas F. Crossley
    The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non-refundable tax credit. This reduced the,jointness'of the tax system: after the reform, secondary earners'effective,first dollar'marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective,first dollar'marginal tax rates faced by women with high-income husbands were particularly reduced. Using difference-indifference estimators, we find a significant increase in labour force participation among women married to higher-income husbands. [source]

    Comparing in-work benefits and the reward to work for families with children in the US and the UK

    FISCAL STUDIES, Issue 1 2001
    Mike Brewer
    Abstract The income transfer systems for low-income families in the US and the UK try both to reduce poverty and to encourage work. In-work benefits are a key part of both countries' strategies through the earned income tax credit and the working families' tax credit (and predecessors) respectively. But tax credits are only one part of the whole tax and welfare system. In-work benefits, taxes and welfare benefits combine in both countries to provide good financial incentives for lone parents to do minimum-wage work, but poorer incentives to increase earnings further. But direct comparisons of budget constraints hide important points of detail. First, not enough is known about what determines take-up of in-work benefits. Second, the considerable differences in assessment and payment mechanisms and frequency between EITC and WFTC mean that low-income families in the US and the UK may respond very differently to apparently similar financial incentives. [source]

    Business Formation and Aggregate Investment

    Christian Keuschnigg
    The paper proposes an intertemporal equilibrium model of vintage capital and monopolistic competition. Reflecting a tradeoff between the number and capacity of new machines, investment may be extensive or intensive. External gains from specialization and rationalization result in distorted investment decisions. The paper compares the effectiveness of a general investment tax credit with a start-up subsidy that shifts the direction of investment towards a more extensive form. An optimal policy of investment promotion is derived. [source]

    Can work alter welfare recipients' beliefs?

    Peter Gottschalk
    A common argument in support of work-based welfare reform is that exposure to work will lead welfare recipients to revise their beliefs about how they will be treated in the labor market. This paper explores the analytical and empirical basis for this argument. The difficulty in testing the assumption that work leads to a change in beliefs is that there is an inherent simultaneity between work and beliefs. Welfare recipients who work may have different beliefs because they learn about the world of work once they enter the labor market. Alternatively, welfare recipients who have a more positive view of work are the ones who are more likely to work. We use a unique data set that helps solve this simultaneity problem. We find that exogenous increases in work induced by an experimental tax credit led to the predicted change in beliefs among younger workers. © 2005 by the Association for Public Policy Analysis and Management [source]

    Welfare transitions in the 1990s: The economy, welfare policy, and the EITC

    Jeffrey GroggerArticle first published online: 25 AUG 200
    The rapid decline in the welfare caseload remains a subject of keen interest to both policymakers and researchers. In this paper, I use data from the Survey of Income and Program Participation spanning the period from 1986 to 1999 to analyze how the economy, welfare reform, the earned income tax credit (EITC), and other factors influence welfare entries and exits, which in turn affect the caseload. I find that the decline in the welfare caseload resulted from both increases in exits and decreases in entries. Entries were most significantly affected by the economy, the decline in the real value of welfare benefits, and the expansion of the EITC. Exits were most significantly affected by the economy and federal welfare reform. Federal reform had its greatest effects on longer-term spells of the type generally experienced by more disadvantaged recipients. Some out-of-sample predictions help explain the otherwise puzzling observation that, despite substantial increases in the unemployment rate since 2000, caseloads have remained roughly constant. © 2004 by the Association for Public Policy Analysis and Management [source]

    Evaluation of Policy Options to Encourage Welfare to Work

    Hielke Buddelmeyer
    This article compares five alternative policy options with the January 2006 tax and social security system. Each option is designed to cost a similar amount of approximately $5 billion per year to the government at the observed level of labour supply. The five options include reducing the lowest income tax rate, increasing the tax-free threshold, increasing the low income tax offset, decreasing all taper rates on own and partner's incomes for a number of allowances, and introducing an earned income tax credit. The criteria for comparison are the labour supply responses, the expected budgetary cost to the government after taking into account labour supply responses, the number of winners and losers from the policy change, the effects on the distribution of effective marginal tax rates, and the effects on the number of jobless households. From the results, it is clear that the option to reduce taper rates is dominated by the other options on all criteria. The other four options each have their advantages and disadvantages; no option scores best on all criteria. [source]

    Stimulus for Organ Donation: A Survey of the American Society of Transplant Surgeons Membership

    J. R. Rodrigue
    Federal legislation has been proposed to modify the National Organ Transplant Act in a way that would permit government-regulated strategies, including financial incentives, to be implemented and evaluated. The Council and Ethics Committee of the American Society of Transplant Surgeons conducted a brief web-based survey of its members' (n = 449, 41.6% response rate) views on acceptable or unacceptable strategies to increase organ donation. The majority of the membership supports reimbursement for funeral expenses, an income tax credit on the final return of a deceased donor and an income tax credit for registering as an organ donor as strategies for increasing deceased donation. Payment for lost wages, guaranteed health insurance and an income tax credit are strategies most strongly supported by the membership to increase living donation. For both deceased and living donation, the membership is mostly opposed to cash payments to donors, their estates or to next-of-kin. There is strong support for a government-regulated trial to evaluate the potential benefits and harms of financial incentives for both deceased and living donation. Overall, there is strong support within the ASTS membership for changes to NOTA that would permit the implementation and careful evaluation of indirect, government-regulated strategies to increase organ donation. [source]

    Assessing the Fiscal Costs and Benefits of A8 Migration to the UK,

    FISCAL STUDIES, Issue 1 2010
    Christian Dustmann
    J61; H20 Abstract This paper assesses the fiscal consequences of migration to the UK from the Central and Eastern European countries that joined the European Union in May 2004 (A8 countries). We show that A8 immigrants who arrived after EU enlargement in 2004 and who have at least one year of residence, and are therefore legally eligible to claim benefits, are 59 per cent less likely than natives to receive state benefits or tax credits and 57 per cent less likely to live in social housing. Furthermore, even if A8 immigrants had the same demographic characteristics as natives, they would still be 13 per cent less likely to receive benefits and 29 per cent less likely to live in social housing. We go on to compare the net fiscal contribution of A8 immigrants with that of individuals born in the UK, and find that in each fiscal year since enlargement in 2004, irrespective of the way that the net fiscal contribution is defined, A8 immigrants made a positive contribution to the public finances despite the fact that the UK has been running a budget deficit over the last few years. This is because they have a higher labour force participation rate, pay proportionately more in indirect taxes and make much less use of benefits and public services. [source]

    Apply with Caution: Introducing UK-Style In-Work Support in Germany,

    FISCAL STUDIES, Issue 1 2007
    Peter Haan
    Estimates of the labour supply effects of recent UK reforms in the area of direct taxes and benefits show that policy can have significant influence on the level of employment. We confirm this in a simulation of an in-work support system introduced into the German tax and benefit system. Our simulation results suggest that introducing in-work tax credits in Germany would increase the employment of single individuals by over 105,000 but would result in a reduction of labour supply among individuals living in couples by about 70,000, among both women and men. The result found for men is especially important as it is markedly different from all results for the UK, where the net response among men has always been found to be positive. Our estimation results call for a high degree of caution as far as ,importing' UK-style tax credits to Germany is concerned. In-work support based on family income would reinforce the existing work disincentives for secondary earners, reducing the employment levels of both men and women living in couples. [source]

    Comparing in-work benefits and the reward to work for families with children in the US and the UK

    FISCAL STUDIES, Issue 1 2001
    Mike Brewer
    Abstract The income transfer systems for low-income families in the US and the UK try both to reduce poverty and to encourage work. In-work benefits are a key part of both countries' strategies through the earned income tax credit and the working families' tax credit (and predecessors) respectively. But tax credits are only one part of the whole tax and welfare system. In-work benefits, taxes and welfare benefits combine in both countries to provide good financial incentives for lone parents to do minimum-wage work, but poorer incentives to increase earnings further. But direct comparisons of budget constraints hide important points of detail. First, not enough is known about what determines take-up of in-work benefits. Second, the considerable differences in assessment and payment mechanisms and frequency between EITC and WFTC mean that low-income families in the US and the UK may respond very differently to apparently similar financial incentives. [source]

    A Note on the Tax Treatment of Private Pensions and Individual Savings Accounts

    FISCAL STUDIES, Issue 1 2000
    The UK government is planning to introduce stakeholder pensions from April 2001 as an alternative to existing personal pensions for people on moderate earnings. But stakeholder pensions are only one way to save for retirement; the new tax-free Individual Savings Account (ISA) is another. This note compares the tax treatments of pensions and ISAs and assesses the conditions under which the tax treatment of private pensions is more generous than that of an ISA to a basicrate taxpayer , the typical target for stakeholder pensions. The abolition of dividend tax credits paid to pension funds in July 1997 reduced the relatively tax-favoured position of pensions, but the tax-free lump sum means that private pensions continue to be a tax-favoured form of saving at most reasonable rates of return. We show that employer contributions to private pensions are particularly tax-favoured. [source]

    Price and Volume Behavior around the Ex-dividend Day: Evidence on the Value of Dividends from American Depositary Receipts and their Underlying Australian Stocks,

    ABSTRACT Australian residents are tax-advantaged, relative to American investors, in their access to imputation tax credits on Australian stocks. This paper provides evidence consistent with a difference in dividend valuations between Australian stocks and their American Depositary Receipts (ADRs). The ex-dividend drop-off ratio is lower for ADRs relative to their underlying Australian stocks and this difference is most pronounced for stocks that have imputation tax credits and high dividend yields. Consistent with dividend capture trading in the Australian market, the difference in drop-off ratios is driven by both temporarily higher Australian cum-prices and temporarily lower Australian ex-prices. Abnormal trading volume about the ex-day is present in both markets and in the Australian market the abnormal volume is greater for dividends with imputation tax credits. Dividend-related trading leads to price differences across the markets on the ex-dividend day. Price differences are also observed when the stock and the ADR trade with different dividend entitlements due to different ex-dividend dates. [source]

    Making work pay, making tax credits work: An assessment with specific reference to lone-parent employment

    Jane Millar
    Abstract This article examines the origins, aims, and design of tax credits in the United Kingdom, and discusses the extent to which tax credits represent a new approach in social security policy. It then focuses on the role that these transfers play in supporting lone mothers in employment, drawing on the experiences of lone-parent families to explore how tax credits worked for them. The discussion highlights the tensions between family and employment change and tax credits rules about reporting changes in circumstances and income. [source]

    Do some enterprise zones create jobs?

    Jed Kolko
    We study how the employment effects of enterprise zones vary with their location, implementation, and administration, based on evidence from California. We use new establishment-level data and geographic mapping methods, coupled with a survey of enterprise zone administrators. Overall, the evidence indicates that enterprise zones do not increase employment. However, the evidence also suggests that the enterprise zone program has a more favorable effect on employment in zones that have a lower share of manufacturing and in zones where managers report doing more marketing and outreach activities. On the other hand, devoting more effort to helping firms get hiring tax credits reduces or eliminates any positive employment effects, which may be attributable to idiosyncrasies of California's enterprise zone program during the period we study. © 2010 by the Association for Public Policy Analysis and Management. [source]

    R&D investment decision and optimal subsidy

    R & D MANAGEMENT, Issue 2 2001
    Jyh-bang Jou
    This article assumes that a firm facing technological uncertainty must decide whether to purchase R&D capital at each instant. R&D capital exhibits both irreversibility and externality through the learning-by-doing effect. The combination of irreversibility and uncertainty drives agents to be more prudent; the maxim ,better safe than sorry' applies. This maxim is more important if uncertainty is greater, technology progresses at a lower pace, the externality is stronger, or a catastrophic event is less likely to occur. A firm ignoring the externality will both invest later and disinvest earlier than a social planner who internalizes the externality. An equal rate of investment tax credits should be given to both costlessly reversible investments and irreversible ones, and the same rate of taxation should be imposed on disinvestment. [source]

    A New Specification of Labour Supply in the MONASH Model with an Illustrative Application

    Peter B. Dixon
    MONASH is a dynamic general equilibrium model of the Australian economy. This article describes a new labour-market specification for MONASH in which people are allocated in year t to categories according to their labourmarket activities in year t , 1. People in each category plan their labour supplies by solving an optimisation problem. Via these problems, we introduce the assumption that people in employment categories supply labour more strongly to employment activities than do people in unemployment categories. Thus we find that employment-stimulating policies in t , 1 increase labour supply in t by shifting the composition of the labour force in t in favour of employment categories and away from unemployment categories. We illustrate this idea by using MONASH to simulate the Dawkins proposal to combine a freeze on award wage rates with tax credits for low-wage workers in low-income families. We find that the Dawkins policy would generate a significant short-run increase in employment. With the increase in employment generating an increase in labour supply, the employment benefits of the policy would persist over many years. However, in the long run, we would expect the effect of the policy on aggregate employment to be small and to depend on how the policy affected the ratio of real after-tax wage rates to unemployment benefits. [source]

    Earned Income Tax Credits: Do They Have Any Role to Play in Australia?

    David Ingles
    Earned income tax credits (EITCs) have been used mainly in the United States. The Australian tax,transfer system is already very complicated and the aims of the EITC,notably reductions in effective tax rates for low income earners,might be achievable through reforms to existing components of the system. Such tax rates can be lowered either through reductions in social security tapers, or reductions in income tax payable. Action to reduce tapers affecting families is already proceeding through the social security component of the Government's tax reform package. To go further, by reducing tapers on the main allowances, like Newstart Allowance and Parenting Payment, would accelerate developments for such allowances to become forms of wage supplementation for the low paid. If it were not desired to go further down this path (and it does have problems), then relief of income tax burdens could be implemented through changes to the rate structure. While the EITC may make sense in the US context, a country with a well-developed welfare system like that of Australia has other options. In particular any EITC in this country is likely to be a supplement, not an alternative, to existing cash support for low income families. [source]

    Poverty And Worklessness In Britain*

    THE ECONOMIC JOURNAL, Issue 494 2004
    Stephen Nickell
    Relative poverty in the UK has risen massively since 1979 mainly because of increasing worklessness, rising earnings dispersion and benefits indexed to prices, not wages. The economic force underlying this is the significant shift in demand against the unskilled. This has substantially weakened the low-skill labour market which has increased both pay dispersion and worklessness, particularly among low-skilled men. Practical policies discussed include improving education and overall well-being for children in the lower part of the ability range, raising wage floors, New Deal policies, tax credits and benefits for the workless. [source]

    Tax Reform and Progressivity

    THE ECONOMIC JOURNAL, Issue 460 2000
    Michael Keen
    The established theory of tax progressivity cannot handle basic tax reform questions, such as whether an increase in personal allowances makes the tax system more progressive, because the core results assume that tax liability is never zero. This paper generalises the core theory to allow for zero tax payments, and applies the new framework to the analysis of allowances, income-related deductions and tax credits. Log concavity of the tax schedule,a property quite distinct from any existing notion of progressivity,emerges as the critical determinant of whether the distribution of the tax burden becomes more progressive as allowances are increased. [source]

    Inside the Sausage Factory: Improving Estimates of the Effects of Health Insurance Expansion Proposals

    Sherry Glied
    Many policy proposals address the lack of insurance coverage, with the most commonly discussed being tax credits to individuals, expansions of existing public programs, subsidies for employers to offer coverage to their workers, and mandates for employers and individuals. Although some policy options may be favored (or disfavored) on theoretical or ideological grounds, many debates about policy center on empirical questions: How much will this option cost? How many people will obtain insurance coverage? Estimates of costs and consequences influence policy in three ways. First, the Office of Management and Budget, the Congressional Budget Office, the Centers for Medicare and Medicaid Services, the Treasury Department, and other government agencies incorporate estimates of the costs of proposals in their budget calculations. Particularly in times of fiscal restraint, the cost of a proposal is central to its legislative prospects. Second, recognizing the importance of final budget numbers, policy advocates include estimates in their advocacy. The fate of a proposal to expand health insurance is influenced by predictions of the proposal's effects on the number of newly insured and the cost of new coverage. Estimates vary widely, for reasons that are often hard to discern and evaluate. This article describes and compares the frameworks and parameters used for insurance modeling. It examines conventions and controversies surrounding a series of modeling parameters: how individuals respond to a change in the price of coverage, the extent of participation in a new plan by those already privately insured, firms' behavior, and the value of public versus private coverage. The article also suggests ways of making models more transparent and proposes "reference case" guidelines for modelers so that consumers can compare modeling results. [source]

    Monitoring poverty and social exclusion 2003

    Richard Reading
    The New Policy Institute has produced its sixth annual report of indicators of poverty and social exclusion. This year's report focuses on regional variations across England, Scotland and Wales. With 5 years of data now available to measure progress since Labour came to office in 1997, it is becoming much clearer where the Government's strategy for combating poverty and social exclusion is being successful , and where it is not. With the number of people living in low-income households now on a steady downward trend, the latest figures (for 2001/2002) passed the notable milestone of taking income poverty lower than at any time in the 1990s. The main reason why the number of people in low-income households fell in the 5 years to 2001/2002 is that there were fewer people in workless households. But, over the same period, the number of people in low-income, working households did not fall. Out-of-work benefits to both working-age families with dependent children and to pensioners have risen by around 30% in real terms since 1998, faster than earnings. This, plus the rise in tax credits, will have had a significant impact on the severity of poverty suffered by some low-income households even when it has not taken them above the low-income threshold. In education, earlier progress in increasing the numbers of those with an adequate minimum level of qualification has stalled, with no further advance since 2000, compared with rapid progress during the second half of the 1990s. Around a quarter of young people at each of the ages of 11, 16 and 19 are still failing to reach a basic level of attainment. There is no sign of any reduction since 1997 in the health inequalities which leave people with low incomes more likely to suffer serious health-related problems. Across the range of indicators, problems of poverty and social exclusion are generally more prevalent in the North-east than in other areas of the country. London has particular problems centred on low income and work and Scotland has particular problems centred on health. [source]