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Tax Rates (tax + rate)
Kinds of Tax Rates Selected AbstractsAN APPROXIMATION FOR THE OPTIMAL LINEAR INCOME TAX RATEAUSTRALIAN ECONOMIC PAPERS, Issue 3 2009JOHN CREEDY This paper derives a convenient method of calculating an approximation to the optimal tax rate in a linear income tax structure. Individuals are assumed to have Cobb-Douglas preferences and the wage rate distribution is lognormal. First, the optimal tax rate is shown, for a general form of social welfare function, to be the smallest root of a quadratic equation involving a welfare-weighted average wage rate. Second, an approximation to this average is derived for an isoelastic social welfare function. This average depends on the degree of inequality aversion of the welfare function and the coefficient on consumption in individuals' utility functions. Calculations show that the method performs well in comparison with standard simulation methods of computing the optimal tax rate. [source] Do Very High Tax Rates Induce Bunching?THE ECONOMIC RECORD, Issue 270 2009Implications for the Design of Income Contingent Loan Schemes Under the Higher Education Contribution Scheme graduates face a sharp discontinuity in their taxable incomes. At the first repayment threshold, they are required to pay a percentage of their entire income to reduce their debts. This results in an extremely high effective marginal tax rate. Using a sample of taxpayer returns we investigate whether taxpayers bunch below the repayment threshold. We find a statistically significant degree of bunching below the threshold, but the effect is economically small. The result has important implications for the design of income contingent university loan schemes. [source] Work Incentives under a New Tax System: The Distribution of Effective Marginal Tax Rates in 2002THE ECONOMIC RECORD, Issue SpecialIssue 2003Gillian Beer Effective marginal tax rates (EMTRs) provide a way of measuring the balance between targeting of welfare payments and the financial incentive to work. High EMTRs result from income tests for welfare payments overlapping with each other and/or the income tax system. Individuals who face high EMTRs over broad ranges of income have little financial incentive to increase their earned income. This paper examines the distribution of EMTRs across the Australian labour force in 2002. It also looks at how the number of people facing high EMTRs has changed since the introduction of the new tax system. [source] Lifetime Net Average Tax Rates in Australia Since Federation,A Generational Accounting StudyTHE ECONOMIC RECORD, Issue 233 2000JOHN ABLETT This paper presents estimates of average net payments to government, as a per cent of average lifetime labour earnings, for generations born in Australia since Federation (1901), based on historical data combined with several reasonable future scenarios covering fiscal policy, growth and demographic change. The results shed light on whether certain generations have been treated more favorably by the public sector than others this century. The main conclusion is that the average lifetime net tax rate will, under reasonable,assumptions, be of the order of 37,39 per cent for all currently living generations born since the mid-1930s. [source] Shareholder Income Taxes and the Relation between Earnings and Returns,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2005DAN S. DHALIWAL Abstract The purpose of this study is to investigate whether and how shareholder-level taxes affect earnings response coefficients (ERCs). Our tests indicate that when the tax rate on dividends increases, ERCs decrease for firms with high levels of dividend yield and whose marginal investor is likely to be an individual. For firms with high levels of share repurchase yield and whose marginal investor is likely to be an individual, an increase in dividend tax rate has no discernible effect on ERCs. These results are consistent with the notion that the tax penalty on dividends, relative to capital gains, reduces the earnings-return relation. [source] Tests of a Deferred Tax Explanation of the Negative Association between the LIFO Reserve and Firm Value,CONTEMPORARY ACCOUNTING RESEARCH, Issue 1 2000DAN S. DHALIWAL Guenther and Trombley (1994) and Jennings, Simko, and Thompson (1996) document a negative association between a firm's last-in, first-out (LIFO) reserve and the market value of its equity. In this paper, we test a deferred tax explanation of this negative association. Specifically, we argue that investors, conditional on adjusting inventory to as-if first-in, first-out (FIFO), estimate a firm's future LIFO liquidation tax burden as its LIFO reserve multiplied by the appropriate corporate tax rate and include this tax-adjusted LIFO reserve in the valuation of a LIFO firm's net assets. On the basis of this argument, the tax-adjusted LIFO reserve is in effect an estimate of an off-balance-sheet deferred tax liability and, as a result, we predict a negative association between the tax-adjusted LIFO reserve and market value of equity. We test our deferred tax explanation by estimating a valuation model in which a firm's market value of equity is expressed as a function of the firm's assets, liabilities, deferred tax liability, and tax-adjusted LIFO reserve; the model is estimated separately in years preceding and following the reduction of tax rates mandated by the US Tax Reform Act of 1986. Test results provide strong support for the deferred tax explanation of the negative association between a firm's LIFO reserve and the market value of its equity. [source] Regional Integration and the Co-ordination of Capital Income TaxationECONOMIC NOTES, Issue 1 2002Valeria De Bonis This paper addresses the question of the need for income tax harmonization in the context of regional integration. It analyses the international distortions and fiscal interdependence arising in the presence of tax rate differentials both under a theoretical and an empirical perspective, and with reference to actual experiences of harmonization attempts. Attention is also paid to the influence of the countries' size on the results, to the strategic behaviour of countries under different international taxations rules, and to the relationships with the countries excluded by the integration process. International tax uniformity does not appear to be the preferable solution, even if some form of concerted agreements might help in reducing inefficiencies deriving from taxation differentials. For instance, in the case of highly mobile factors, like financial capital, if the integrating countries apply the source principle and the interest rate is the same across them, the source-based tax rate on non residents must equal the residence country tax rate on residents. Such a rule would allow the countries to set autonomously their tax rate and, at the same time, eliminate cross-border effects. If there are more than two integrating countries, the tax rates on non residents should discriminate according to the internal tax rate of the residence country. (J.E.L.: H87, F20, H20). [source] AUSTRALIAN EARLY RETIREMENT TAX BIASES PRIOR TO JULY 2007 AND THE LIKELY EFFECTS OF TAX REFORM ON RETIREMENT PLANSECONOMIC PAPERS: A JOURNAL OF APPLIED ECONOMICS AND POLICY, Issue 3 2008BRUCE FELMINGHAM We develop a simulation model explaining the accrual of retirement wealth gained from working one year beyond retirement and from this calculate an implicit tax rate on the additional year's work. We find that the pre-July 2007 Australian tax on retirement benefits was biased in favour of ages 59 and less, while the implicit rate was positive on retirement past 59. We also use the results of a national survey of 2,500 households (ASRAM SURVEY) to determine the likely response to the tax changes implemented in July 2007 and find that half those sampled are either very likely or likely to change their expected retirement dates in response to the tax changes. [source] Is Reserve-ratio Arithmetic More Pleasant?ECONOMICA, Issue 279 2003Joydeep Bhattacharya Does it matter in a revenue-neutral setting if the government changes the inflation tax base or the inflation tax rate? We answer this question within the context of an overlapping-generations model in which government bonds, capital and cash reserves coexist. We consider experiments that parallel those studied in Sargent and Wallace's ,unpleasant monetarist arithmetic'; the government uses seigniorage to service its debt, choosing between changing either the money growth rate (the inflation tax rate) or the reserve-requirement ratio (the inflation tax base). In the former case we obtain standard unpleasant arithmetic; in the long run a permanent open market sale results in higher money growth, and higher long-run inflation. Somewhat surprisingly, it turns out that, for a given money growth rate, lower reserve requirements fund the government's interest expense. Associated with the lower reserve requirements is lower long-run inflation and higher welfare, compared with the money-growth case. The broad message is that reserve-ratio arithmetic can be pleasant even when money-growth arithmetic is not. [source] SHOULD YOU ARM YOUR FUTURE VICTIMS?ECONOMICS & POLITICS, Issue 3 2006JEAN-PAUL AZAM A model is presented where the ruler may arm the producers, in order to convince them that he will not expropriate them ex post. This sets an upper limit on the tax rate, not higher than their probability of losing their income, should a war occur. The relevance of this analysis is illustrated by discussing various case studies, involving post-conflict situations. Some variants of the model are presented for highlighting some implementation problems, related to asymmetric information or to positive initial endowments of weapons or non-produced wealth, which may lead to war in equilibrium. [source] Does Germany Collect Revenue from Taxing the Normal Return to Capital?,FISCAL STUDIES, Issue 4 2005Johannes Becker Abstract A widespread objection to the introduction of consumption tax systems claims that this would lead to high tax revenue losses. This paper investigates the revenue effects of a consumption tax reform in Germany. Our results suggest that the revenue losses would be surprisingly low. We find a maximum revenue loss of 1.6 per cent of annual GDP. In some years, we even find tax revenue gains. This implies that the current tax system collects little revenue from taxing the normal return to capital. Based on these results, we calculate a macroeconomic measure of the effective tax rate on capital income. [source] Green Tax Reform and CompetitivenessGERMAN ECONOMIC REVIEW, Issue 1 2001Erkki Koskela This paper studies a revenue-neutral green tax reform that substitutes energy for wage taxes in an open economy with unemployment. As long as the labour tax rate exceeds the energy tax rate, such a reform will increase employment, reduce the domestic firms' unit cost of production and hence increase international competitiveness and output of the economy. The driving force behind these results is the technological substitution process that a green tax reform will bring about. The resulting reduction in unemployment is welfare increasing since energy, which the country has to buy at its true national opportunity cost, is replaced with labour, whose price is above its social opportunity cost. [source] Time-consistent optimal fiscal policy*INTERNATIONAL ECONOMIC REVIEW, Issue 4 2003Paul Klein This article studies the properties of optimal fiscal policy in a stochastic growth model when the government cannot commit itself beyond the next period's capital income tax rate. We find that the results contrast markedly with those under full commitment. First, capital income tax rates are very high (65% on average versus close to zero on average under full commitment). Second, labor income taxes are rather low on average (about 12% versus a value of around 31% under full commitment). Finally, labor income taxes are quite volatile, whereas under full commitment their standard deviation is essentially zero. [source] Expansionary Fiscal Shocks and the US Trade Deficit,INTERNATIONAL FINANCE, Issue 3 2005Christopher J. Erceg In this paper, we use a dynamic general equilibrium model of an open economy to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labour income tax rate. Our salient finding is that a fiscal deficit has a relatively small effect on the US trade balance, irrespective of whether the source is a spending increase or tax cut. In our benchmark calibration, we find that a rise in the fiscal deficit of 1 percentage point of gross domestic product (GDP) induces the trade balance to deteriorate by 0.2 percentage point of GDP or less. Noticeably larger effects are only likely to be elicited under implausibly high values of the short-run trade price elasticity, or of the share of liquidity-constrained households in the economy. From a policy perspective, our analysis suggests that even reducing the current US fiscal deficit (of 3% of GDP) to zero would be unlikely to narrow the burgeoning US trade deficit significantly. [source] Structure of the optimal income tax in the quasi-linear modelINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2007Nigar Hashimzade H21; H24 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. [source] Taxes, Leverage, and the Cost of Equity CapitalJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2006DAN DHALIWAL ABSTRACT We examine the associations among leverage, corporate and investor level taxes, and the firm's implied cost of equity capital. Expanding on Modigliani and Miller [1958, 1963], the cost of equity capital can be expressed as a function of leverage and corporate and investor level taxes. Based on this expression, we predict that the cost of equity is increasing in leverage, and that corporate taxes mitigate this leverage-related risk premium, while the personal tax disadvantage of debt increases this premium. We empirically test these predictions using implied cost of equity estimates and proxies for the firm's corporate tax rate and the personal tax disadvantage of debt. Our results suggest that the equity risk premium associated with leverage is decreasing in the corporate tax benefit from debt. We find some evidence that the equity risk premium from leverage is increasing in the personal tax penalty associated with debt. [source] ESTIMATING THE TAX BENEFITS OF DEBTJOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2001John Graham The standard approach to valuing interest tax shields assumes that full tax benefits are realized on every dollar of interest deduction in every scenario. The approach presented in this paper takes account of the possibility that interest tax shields cannot be used in some scenarios, in part because of variations in the firm's profitability. Because of the dynamic nature of the tax code (e.g., tax-loss carrybacks and carryforwards), it is necessary to consider past and future taxable income when estimating today's effective marginal tax rate. The paper uses a series of numerical examples to show that (1) the incremental value of an extra dollar of interest deduction is equal to the marginal tax rate appropriate for that dollar; and (2) a firm's effective marginal tax rate (and therefore the marginal benefit of incremental interest deductions) can actually decline as the firm takes on additional debt. Based on marginal benefit functions for thousands of firms from 1980,1999, the author concludes that the tax benefits of debt averaged approximately 10% of firm value during the 1980s, while declining to around 8% in the 1990s. By taking maximum advantage of the interest tax shield, the average firm could have increased its value by approximately 15% over the 1980s and 1990s, suggesting that the consequences of being underlevered are significant. Surprisingly, many of the companies that appear best able to service debt (i.e., those with the lowest apparent costs of debt) use the least amount of debt, on average. Treasurers and CFOs should critically reevaluate their companies' debt policies and consider the benefits of additional leverage, even if taking on more debt causes their credit ratings to slip a notch. [source] The Political Power of the Retirees in a Two-Dimensional Voting ModelJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 4 2003Georges Casamatta We show that the retirees are able to obtain favorable pension policies whereas they belong to a minority in the population. The argument relies on the multidimensional nature of the political process. We consider a two-dimensional collective choice problem. The first of these choices is the level of the contribution rate to the Pay-As-You-Go pension system. The second is a noneconomic decision, unrelated to the pension system. Using a political agency model, we show that, as soon as the retirees are sufficiently numerous, the equilibrium tax rate may be higher than the tax rate preferred by the young, who yet constitute a majority over the pension issue. [source] Common and Private Values of the Firm in Tax CompetitionJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 4 2001David Scoones We develop a simple model of interregional tax competition to explore how the balance between common and region-specific aspects of a project's value affects the magnitudes of tax breaks offered by governments, when the firm possesses private information on the region-specific values. We examine cases in which the tax applies to both the common and private values and to each component separately. The model predicts that when the common and observable part of the value of a project increases relative to the variance of the region-specific private values, the stringency of competition reduces the equilibrium tax rate. Conversely, if the competing regions are sufficiently different, bidding is less aggressive. One interpretation of the results is that firms that are observed to be large get better tax breaks. The intuition is closely related to the Bertrand model of differentiated product market competition. [source] Pollution Abatement Investment When Environmental Regulation Is UncertainJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 2 2000Y.H. Farzin In a dynamic model of a risk-neutral competitive firm that can lower its pollution emissions per unit of output by building up abatement capital stock, we examine the effect of a higher pollution tax rate on abatement investment both under full certainty and when the timing or the size of the tax increase is uncertain. We show that a higher pollution tax encourages abatement investment if it does not exceed a certain threshold rate. However, akin to the Diamond-Mirrlees tax anomaly, it is possible that a higher pollution tax rate results in more pollution. The magnitude uncertainty discourages abatement investment, but at the time of the actual tax increase the abatement investment path may shift either upward or downward. On the other hand, when the timing is uncertain, the abatement investment path always jumps upward, thus suggesting that the effect of magnitude uncertainty on the optimal investment path may be more pronounced than that of timing uncertainty. Further, we show that the ad hoc practice of raising the discount rate to account for the uncertainty leads to underinvestment in abatement capital. We show how the size of this underinvestment bias varies with the future tax increase. Finally, we show that a credible threat to accelerate the tax increase can induce more abatement investment. [source] Pigouvian Taxes in General Equilibrium with a Fixed Tax Redistribution RuleJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 1 2000Andreas Lange This paper establishes existence of a first-best emission tax in a general equilibrium model with pollution, when the redistribution rule of the tax income is chosen fixed and independently of the Pigouvian tax rate. It is known that under standard convexity assumptions each Pareto efficient allocation can be implemented by simultaneously choosing a Pigouvian tax rate and an appropriate lump sum redistribution of income. In real politics, however, tax redistribution schemes are often restricted to a small feasible set. Nonetheless we show that for any given lump sum redistribution rule, being continuous in overall tax income, an emission tax rate exists that leads to a Pareto efficient equilibrium. [source] Flexible Spending Accounts as InsuranceJOURNAL OF RISK AND INSURANCE, Issue 1 2003James H. Cardon We model flexible spending accounts (FSAs) as a special type of insurance policy. We prove the following results given losses drawn from a continuous distribution: (1) the optimal election amount, F*, is increasing in the consumer's level of risk aversion; (2) F* is increasing in the level of the maximum loss; If utility is decreasing in absolute risk aversion (DARA), then F* is (3) decreasing in income and (4) increasing in the marginal tax rate. [source] ENTRY AND EXIT OF LABOR AND CAPITAL IN A FISHERYNATURAL RESOURCE MODELING, Issue 2 2005ASGEIR DANIELSSON ABSTRACT. Exit and entry of fishermen, as well as vessels, is modeled explicitly. If the speed of exit and entry of fishermen is less than instantaneous the wage rate varies with the fortunes of the fishing firms and affects the endogenous labor supply creating a second transmission mechanism from profits to effort. There are realistic cases where this mechanism has important effects on the stability of the dynamic system and on the effects of taxes (subsisdies) on the size of the fish stock. If labor supply depends negatively on the wage rate, the immediate effect of an increase in the tax rate is to increase effort and harvest. This condition makes it also more probable that the dynamic system is unstable. In those cases where the dynamic system is unstable the increase in the tax rate increases overexploitation not only in the short-term but also in the long-term. [source] Seasonal Homes and the Local Property Tax: Evidence from New York StateAMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY, Issue 2 2009Lester Hadsell This study examines the growth of seasonal (i.e., second or vacation) homes and their impact on local property tax rates using evidence from towns and villages in New York State between 1990 and 2000. We find that a greater concentration of seasonal homes in a municipality is associated with a lower effective property tax rate in towns, and a higher rate in small and rural villages. An alternative measure of tax burden, property taxes as a percentage of median household income, is not related to the presence of seasonal homes in towns but is positively related in small and rural villages. Our findings for towns contradict the findings of an earlier study by Fritz (1982) that found that an increase in town property allocated to vacation homes was significantly associated with an increasing property tax rate, although our findings for villages supports his findings. [source] Führt Steuervereinfachung zu einer ,gerechteren" Einkommensverteilung?PERSPEKTIVEN DER WIRTSCHAFTSPOLITIK, Issue 1 2007Eine empirische Analyse für Deutschland This paper investigates the distributional impact of tax simplification. Our empirical analysis is based on a microsimulation model for the German tax and transfer system (FiFoSiM). We model tax simplification as the abolition of a set of controversial deductions from the tax base. We combine these simplifications with a tax rate schedule adjustment to preserve revenue neutrality. The combination with a flat tax rate increases the inequality of after-tax incomes whereas the combination with a directly progressive rate schedule adjustment reduces inequality. [source] Dynamic Revenue Curves for North Carolina TaxesPUBLIC BUDGETING AND FINANCE, Issue 4 2003Michael L. Walden Dynamic tax analysis allows a tax rate to affect the economic base being taxed. Consequently, the relationship between a tax rate and the taxed economic base is nonlinear and includes a region where a higher (lower) tax rate results in lower (higher) tax revenues. Relationships between the economic base and the tax rate are estimated for five major taxes in North Carolina. In all but one case, a statistically significant negative effect was found for the tax rate on the economic base. Dynamic relationships were strongest for the sales tax and weakest for the unemployment compensation tax. [source] Evaluation of Policy Options to Encourage Welfare to WorkTHE AUSTRALIAN ECONOMIC REVIEW, Issue 3 2006Hielke 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] Do Very High Tax Rates Induce Bunching?THE ECONOMIC RECORD, Issue 270 2009Implications for the Design of Income Contingent Loan Schemes Under the Higher Education Contribution Scheme graduates face a sharp discontinuity in their taxable incomes. At the first repayment threshold, they are required to pay a percentage of their entire income to reduce their debts. This results in an extremely high effective marginal tax rate. Using a sample of taxpayer returns we investigate whether taxpayers bunch below the repayment threshold. We find a statistically significant degree of bunching below the threshold, but the effect is economically small. The result has important implications for the design of income contingent university loan schemes. [source] Asymmetric Responses of the Underground Economy to Tax Changes: Evidence From New Zealand DataTHE ECONOMIC RECORD, Issue 237 2001David E.A. Giles This paper considers the relationship between taxes and the size of the New Zealand underground economy. Previous studies indicate that a positive relationship exists in this and certain other countries. This paper addresses the question: ,Is the response of the underground economy to an increase in taxes the same as its response to a decrease in taxes?' We find that although the effect on the underground economy of an upward movement in the effective tax rate is numerically greater than that of a downward tax movement, this difference is not statistically significant. [source] Lifetime Net Average Tax Rates in Australia Since Federation,A Generational Accounting StudyTHE ECONOMIC RECORD, Issue 233 2000JOHN ABLETT This paper presents estimates of average net payments to government, as a per cent of average lifetime labour earnings, for generations born in Australia since Federation (1901), based on historical data combined with several reasonable future scenarios covering fiscal policy, growth and demographic change. The results shed light on whether certain generations have been treated more favorably by the public sector than others this century. The main conclusion is that the average lifetime net tax rate will, under reasonable,assumptions, be of the order of 37,39 per cent for all currently living generations born since the mid-1930s. [source] | ||||||||||||||||||||||||||||||||||||||||