scholarly journals Rising markups and optimal redistributive taxation

2021 ◽  
Author(s):  
Eren Gürer
Keyword(s):  
Optimal Policy ◽  
Market Competition ◽  
Income Taxes ◽  
Policy Response ◽  
Labor Income ◽  
Cost Of Living ◽  
Profit Shifting ◽  
Tax Base ◽  
Redistributive Taxation ◽  
Optimal Policies

AbstractThis study explores the implications of rising markups for optimal Mirrleesian income and profit taxation. Using a stylized model with two individuals, the main forces shaping welfare-optimal policies are analytically characterized. Although a higher profit tax has redistributive benefits, it adversely affects market competition, leading to a greater equilibrium cost-of-living. Rising markups directly contribute to a decline in optimal marginal taxes on labor income. The optimal policy response to higher markups includes increasingly relying on the profit tax to fund redistribution. Declining optimal marginal income taxes assists the redistributive function of the profit tax by contributing to the expansion of the profit tax base. This response alone considerably increases the equilibrium cost-of-living. Nevertheless, a majority of the individuals become better off with the optimal policy. If it is not possible to tax profits optimally, due, for example, to profit shifting, increasing redistribution via income taxes is not optimal; every individual is worse off relative to the scenario with optimal profit taxation.

scholarly journals Technical Change, Wage Inequality, and Taxes

2015 ◽  
Vol 105 (10) ◽  
pp. 3061-3101 ◽  
Author(s):  
Laurence Ales ◽  
Musab Kurnaz ◽  
Christopher Sleet
Keyword(s):  
Labor Market ◽  
Income Distribution ◽  
Wage Inequality ◽  
Technical Change ◽  
Optimal Policy ◽  
Policy Design ◽  
Income Taxes ◽  
Policy Response ◽  
Assignment Model ◽  
Optimal Tax

This paper considers the normative implications of technical change for tax policy design. A task-to-talent assignment model of the labor market is embedded into an optimal tax problem. Technical change modifies equilibrium wage growth across talents and the substitutability of talents across tasks. The overall optimal policy response is to reduce marginal income taxes on low to middle incomes, while raising those on middle to high incomes. The reform favors those in the middle of the income distribution, reducing their average taxes while lowering transfers to those at the bottom. (JEL D31, H21, H23, H24, J31, O33)

Business Income Taxes

2020 ◽  
Author(s):  
Leonard E. Burman ◽  
Joel Slemrod
Keyword(s):  
Income Tax ◽  
Income Taxes ◽  
Labor Income ◽  
Business Income

How do we tax corporations’ income? In principle, under an income tax all income is subject to taxation. Moreover, no kinds of income are subject to exceptionally high tax and no kinds are subject to exceptionally low tax. This principle applies to labor income, the...

Bias optimal admission control policies for a multiclass nonstationary queueing system

2002 ◽  
Vol 39 (01) ◽  
pp. 20-37 ◽  
Author(s):  
Mark E. Lewis ◽  
Hayriye Ayhan ◽  
Robert D. Foley
Keyword(s):  
Optimal Policy ◽  
Queueing System ◽  
Sufficient Conditions ◽  
System Capacity ◽  
Average Reward ◽  
Finite Capacity ◽  
Long Run ◽  
Optimal Policies ◽  
Service Rates ◽  
Long Run Average Reward

We consider a finite-capacity queueing system where arriving customers offer rewards which are paid upon acceptance into the system. The gatekeeper, whose objective is to ‘maximize’ rewards, decides if the reward offered is sufficient to accept or reject the arriving customer. Suppose the arrival rates, service rates, and system capacity are changing over time in a known manner. We show that all bias optimal (a refinement of long-run average reward optimal) policies are of threshold form. Furthermore, we give sufficient conditions for the bias optimal policy to be monotonic in time. We show, via a counterexample, that if these conditions are violated, the optimal policy may not be monotonic in time or of threshold form.

scholarly journals Population Aging and Potential Growth in Asia

2016 ◽  
Vol 33 (2) ◽  
pp. 56-73 ◽  
Author(s):  
Keisuke Otsu ◽  
Katsuyuki Shibayama
Keyword(s):  
Economic Growth ◽  
Productivity Growth ◽  
Population Aging ◽  
Output Growth ◽  
Income Taxes ◽  
Labor Income ◽  
Labor Participation ◽  
Potential Growth ◽  
Asian Economies

We study the effects of projected population aging on potential growth in Asian economies over the period 2015–2050. We find that an increase in the share of the population over 64 years of age will significantly lower output growth through decreased labor participation. Population aging can also reduce economic growth through increased labor income taxes and dampened productivity growth.

scholarly journals Reforming the individual income tax in Spain

SERIEs ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 369-406 ◽  
Author(s):  
Nezih Guner ◽  
Javier López-Segovia ◽  
Roberto Ramos
Keyword(s):  
Labor Supply ◽  
Income Taxes ◽  
Tax Revenue ◽  
Labor Income ◽  
Marginal Tax Rate ◽  
Tax Rate ◽  
Percentage Points ◽  
The Mean ◽  
The Government ◽  
The Individual

AbstractCan the Spanish government generate more tax revenue by making personal income taxes more progressive? To answer this question, we build a life-cycle economy with uninsurable labor productivity risk and endogenous labor supply. Individuals face progressive taxes on labor and capital incomes and proportional taxes that capture social security, corporate income, and consumption taxes. Our answer is yes, but not much. A reform that increases labor income taxes for individuals who earn more than the mean labor income and reduces taxes for those who earn less than the mean labor income generates a small additional revenue. The revenue from labor income taxes is maximized at an effective marginal tax rate of 51.6% (38.9%) for the richest 1% (5%) of individuals, versus 46.3% (34.7%) in the benchmark economy. The increase in revenue from labor income taxes is only 0.82%, while the total tax revenue declines by 1.55%. The higher progressivity is associated with lower aggregate labor supply and capital. As a result, the government collects higher taxes from a smaller economy. The total tax revenue is higher if marginal taxes are raised only for the top earners. The increase, however, must be substantial and cover a large segment of top earners. The rise in tax collection from a 3 percentage points increase on the top 1% is just 0.09%. A 10 percentage points increase on the top 10% of earners (those who earn more than €41,699) raises total tax revenue by 2.81%.

Scandinavian Local Income Taxation: Lessons for the United States?

1977 ◽  
Vol 5 (4) ◽  
pp. 471-488 ◽  
Author(s):  
Steven D. Gold
Keyword(s):  
United States ◽  
The United States ◽  
National Government ◽  
Institutional Arrangements ◽  
Income Taxes ◽  
Income Taxation ◽  
Local Autonomy ◽  
Tax Base ◽  
Fiscal Disparities

This paper describes and analyzes the experiences of Norway. Sweden and Denmark with local income taxation in order to test the validity of comments made by numerous American economists about such taxes. Although local income taxes are their major source of locally raised revenue, it appears that the problems of revenue instability and tax base mobility are not serious in these countries. Fiscal disparities have been greatly reduced through consolidation of government units and heavy reliance on transfers from the national government, and these institutional arrangements may have reduced local autonomy in some important respects. The heavy reliance on income taxes by all levels of government is one reason for the extremely high marginal tax rales to which most workers are subject.

Average optimal policies in Markov decision drift processes with applications to a queueing and a replacement model

1983 ◽  
Vol 15 (2) ◽  
pp. 274-303 ◽  
Author(s):  
Arie Hordijk ◽  
Frank A. Van Der Duyn Schouten
Keyword(s):  
Markov Decision Processes ◽  
Optimal Policy ◽  
Continuous Time ◽  
Sufficient Conditions ◽  
Decision Processes ◽  
Time Parameter ◽  
Queueing Model ◽  
Replacement Model ◽  
Optimal Policies ◽  
Markov Decision

Recently the authors introduced the concept of Markov decision drift processes. A Markov decision drift process can be seen as a straightforward generalization of a Markov decision process with continuous time parameter. In this paper we investigate the existence of stationary average optimal policies for Markov decision drift processes. Using a well-known Abelian theorem we derive sufficient conditions, which guarantee that a ‘limit point' of a sequence of discounted optimal policies with the discounting factor approaching 1 is an average optimal policy. An alternative set of sufficient conditions is obtained for the case in which the discounted optimal policies generate regenerative stochastic processes. The latter set of conditions is easier to verify in several applications. The results of this paper are also applicable to Markov decision processes with discrete or continuous time parameter and to semi-Markov decision processes. In this sense they generalize some well-known results for Markov decision processes with finite or compact action space. Applications to an M/M/1 queueing model and a maintenance replacement model are given. It is shown that under certain conditions on the model parameters the average optimal policy for the M/M/1 queueing model is monotone non-decreasing (as a function of the number of waiting customers) with respect to the service intensity and monotone non-increasing with respect to the arrival intensity. For the maintenance replacement model we prove the average optimality of a bang-bang type policy. Special attention is paid to the computation of the optimal control parameters.

Profit Shifting before and after the Tax Cuts and Jobs Act

2020 ◽  
Vol 73 (4) ◽  
pp. 1233-1266
Author(s):  
Kimberly A. Clausing
Keyword(s):  
The United States ◽  
Tax Revenue ◽  
Profit Shifting ◽  
Tax Base ◽  
Foreign Countries ◽  
Before And After ◽  
Corporate Profits ◽  
Jobs Act ◽  
The U.S ◽  
Tax Cuts

In recent years, profit shifting by multinational companies (MNCs) has generated substantial revenue costs to the U.S. government. The Tax Cuts and Jobs Act (TCJA) changed U.S. international tax law in several important ways. This paper discusses the nature of these changes and their possible effects on profit shifting. The paper also evaluates the effects of the global intangible low-taxed income (GILTI) tax on the location of taxable profits. Once company adjustment to the legislation is complete, estimates suggest that the GILTI tax will reduce the corporate profits of U.S. multinational affiliates in haven countries by about 12-16 percent, modestly increasing the tax base in both the United States and in higher-tax foreign countries. However, a per-country minimum tax would generate much larger increases in the U.S. tax base; a per-country tax at the same rate reduces haven profits by 23-31 percent, resulting in larger gains in U.S. tax revenue.

A note on bias optimality in controlled queueing systems

2000 ◽  
Vol 37 (1) ◽  
pp. 300-305 ◽  
Author(s):  
Mark E. Lewis ◽  
Martin L. Puterman
Keyword(s):  
Optimal Policy ◽  
Queueing Systems ◽  
Control Limit ◽  
Lower Control Limit ◽  
Optimal Policies ◽  
Holding Cost ◽  
Bias Optimality ◽  
Number Of Customers

The use of bias optimality to distinguish among gain optimal policies was recently studied by Haviv and Puterman [1] and extended in Lewis et al. [2]. In [1], upon arrival to an M/M/1 queue, customers offer the gatekeeper a reward R. If accepted, the gatekeeper immediately receives the reward, but is charged a holding cost, c(s), depending on the number of customers in the system. The gatekeeper, whose objective is to ‘maximize’ rewards, must decide whether to admit the customer. If the customer is accepted, the customer joins the queue and awaits service. Haviv and Puterman [1] showed there can be only two Markovian, stationary, deterministic gain optimal policies and that only the policy which uses the larger control limit is bias optimal. This showed the usefulness of bias optimality to distinguish between gain optimal policies. In the same paper, they conjectured that if the gatekeeper receives the reward upon completion of a job instead of upon entry, the bias optimal policy will be the lower control limit. This note confirms that conjecture.

Sign in / Sign up

Export Citation Format

Share Document