Internal Revenue
Barbara Kastlunger, Stefan Dressler, Erich Kirchler, Luigi Mittone & Martin Voracek
Journal of Economic Psychology, forthcoming
Abstract:
We used decision making experiments to investigate tax compliance of women and men and focused on gender-role orientation as well as on the second-to-fourth digit ratio (2D:4D), a putative marker of prenatal testosterone exposure. In 60 experimental periods, participants were endowed with a certain amount of money representing income and had to pay taxes. They were audited with a certain probability and fined in case of detected evasion. Both demographic sex and gender-role orientation were significantly related to tax compliance, whereas 2D:4D was not. Women and less male-typical individuals were more compliant than men and more male-typical individuals. Women and men also differed regarding their taxpaying strategies. Whereas for men audits increased subsequent evasion, women's tax payments were less affected by prior audits.
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When Is Tax Enforcement Publicized?
Joshua Blank & Daniel Levin
Virginia Tax Review, forthcoming
Abstract:
Every spring, the federal government appears to deliver an abundance of announcements that describe criminal convictions and civil injunctions involving taxpayers who have been accused of committing tax fraud. Commentators have occasionally suggested that the government announces a large number of tax enforcement actions in close proximity to a critical date in the tax compliance landscape: April 15, "Tax Day." Despite their provocative implications, these claims are speculative at best, as they lack any empirical support. This Article fills the empirical void by seeking to answer a straightforward question: when does the government publicize tax enforcement? To conduct our study, we analyzed all 782 press releases issued by the U.S. Department of Justice Tax Division during the seven-year period of 2003 through 2009 in which the agency announced a civil or criminal tax enforcement action against a specific taxpayer identified by name. Our principal finding is that, from 2003 through 2009, the government issued a disproportionately large number of tax enforcement press releases during the weeks immediately prior to Tax Day compared to the rest of the year and that this difference is highly statistically significant. A convincing explanation for this finding is that government officials deliberately use tax enforcement publicity to influence individual taxpayers' perceptions and knowledge of audit probability, tax penalties and the government's tax enforcement efficacy while taxpayers are preparing to file their annual individual tax returns.
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Liquidity, redistribution, and the welfare cost of inflation
Jonathan Chiu & Miguel Molico
Journal of Monetary Economics, forthcoming
Abstract:
The long-run welfare costs of inflation are studied in a micro-founded model with trading frictions and costly liquidity management. By modelling the liquidity management decision, the model endogenizes the responses of velocity, output, the degree of market segmentation, and the distribution of money. Compared to the traditional estimates based on a representative agent model, the welfare costs of inflation are significantly smaller due to distributional effects of inflation. The welfare cost of increasing inflation from 0% to 10% is 0.62% of consumption for the U.S. economy. Furthermore, the welfare cost is generally non-linear in the inflation rate.
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Estimated Macroeconomic Effects of a Chinese Yuan Appreciation
Ray Fair
Yale Working Paper, March 2010
Abstract:
This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of a Chinese yuan appreciation. The estimated effects on U.S. output and employment are modest. Positive effects on U.S. output from a decrease in imports from China are offset by negative effects on U.S. output from increased inflation and from a decrease in U.S. exports to China because of a Chinese contraction.
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Forecasting the Resurgence of the U.S. Economy in 2010: An Expert Judgment Approach
Andrew Blair, Gershon Mandelker, Thomas Saaty & Rozann Whitaker
Socio-Economic Planning Sciences, forthcoming
Abstract:
This paper describes a forecast, performed in December 2008, of the time of the recovery of the U.S. economy from the contraction that began in December 2007. As in two earlier papers, the forecast uses an expert judgment approach, the Analytic Hierarchy Process (AHP), within the framework of decision theory, as well as its generalization to dependence and feedback in the form of the Analytic Network Process (ANP). The findings of this paper are that the economy would begin its recovery in July-August, 2010. While forecasting is always hazardous, our 2001 paper successfully forecast the date the recovery began. Since 1920 the validating authority for the turnaround dates has traditionally been the widely recognized National Bureau of Economic Research (NBER). The Bureau usually releases an official statement with their finding many months after the event (and of course after the forecasts had been done). Our results on the month in which the recovery began in 2001 were confirmed by the NBER in July 2003. We will again await the NBER determination of the time of recovery from the current recession.
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Do Powerful Politicians Cause Corporate Downsizing?
Lauren Cohen, Joshua Coval & Christopher Malloy
NBER Working Paper, March 2010
Abstract:
This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity. These corporate reactions follow both Senate and House committee chair changes, are present among large and small firms and within large and small states, are partially reversed when the congressman resigns, and are most pronounced among geographically-concentrated firms. The effects are economically meaningful and the mechanism - entirely distinct from the more traditional interest rate and tax channels - suggests new considerations in assessing the impact of government spending on private sector economic activity.
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Optimal democratic mechanisms for taxation and public-good provision
Felix Bierbrauer & Marco Sahm
Journal of Public Economics, forthcoming
Abstract:
We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.
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Government Intervention in the Housing Market: Who Wins, Who Loses?
Max Floetotto & Johannes Stroebel
Stanford Working Paper, March 2010
Abstract:
We study the effects of government intervention in the housing market on prices, quantities and welfare in a general equilibrium model with heterogeneous agents. We consider (i) the exclusion of owner-occupied imputed rents from taxation, (ii) the tax deductibility of mortgage interest payments, and (iii) the introduction of home purchase tax credits. When comparing stationary equilibria, we find that removing the asymmetric tax treatment of owner-occupied and rental housing generates welfare gains for most agents, as does the elimination of the mortgage interest deductibility. However, welfare impacts are more varied during the transition to the new steady states, highlighting the importance of focusing on transition periods for policy analysis. Our results also suggest that home buyer tax credits have negative welfare effects.
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The value added tax: Its causes and consequences
Michael Keen & Ben Lockwood
Journal of Development Economics, July 2010, Pages 138-151
Abstract:
This paper explores the causes and consequences of the remarkable rise of the value added tax (VAT), asking what has shaped its adoption and, in particular, whether it has proved an especially effective form of taxation. It is first shown that a tax innovation, such as the introduction of a VAT, reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. This leads to the estimation, on a panel of 143 countries for 25 years, of a system describing both the probability of VAT adoption and the revenue impact of the VAT. The results point to a rich set of determinants of VAT adoption, and to a significant but complex impact on the revenue ratio. The estimates suggest, very tentatively, that most countries which have adopted a VAT have thereby gained a more effective tax instrument, though this is less apparent in sub-Saharan Africa.
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Christian Martin
Northwestern University Working Paper, October 2009
Abstract:
This article shows how diffusion of the two policy instruments "cigarette taxation" and "smoke free air regulation" across state borders in the United States is influenced and changed by the ideology of state governments. Developing and applying the concept of conditional diffusion I show 1) that the cigarette taxes in states with liberal governments are positively related to the cigarette taxes in adjacent states, while very conservative governments lower taxes in a high-tax environment and 2) that liberal governments increase the restrictiveness of smoke free air policies if confronted with the diffusion influence from highly restrictive states while conservative governments, under the same circumstances, employ laxer regulation. Taken unconditionally, the ideological positions of governments reveal no influence in an interdependent policy environment. Beyond its subject matter, the article therefore generally calls for a careful specification of cross-jurisdictional influences in models with unit interdependence.
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How Are Businesses Responding to Minnesota's Tax-Free Zone Program?
Tonya Hansen & Laura Kalambokidis
Economic Development Quarterly, May 2010, Pages 180-192
Abstract:
In 2003, Minnesota enacted a tax-free-zone economic development program, Job Opportunity Building Zone (JOBZ), that is of a longer term and more generous than most similar state programs. In this article, the authors analyze publicly available data on the new investments in capital and labor that Minnesota businesses report making in response to the program. The authors find that businesses signing deals in 2004 and 2005 reported creating 4,891 jobs and investing $768 million, with the reported activity varying significantly across the state. The number of jobs reportedly created represents less than 1% of Minnesota's total nonfarm, private employment. The authors also combine the businesses' reported data with county-level economic data and analyze how JOBZ-related investment is correlated with economic growth in each county. The authors find little evidence of JOBZ's impact on county-level economic growth during the first 3 years of the program, but do find significant impacts of several workforce and demographic variables on county-level growth.