HOW COSTLY ARE BORROWING COSTS? AN ANALYSIS OF ALTERNATIVE FISCAL POLICIES DURING CRISES

2015 ◽  
Vol 21 (5) ◽  
pp. 1141-1157
Author(s):  
Inci Gumus
Keyword(s):  
Borrowing Constraints ◽  
Labor Income ◽  
Fiscal Policies ◽  
Capital Income ◽  
Tax Rate ◽  
Percentage Points ◽  
Tax Reduction ◽  
Labor Tax ◽  
The Government ◽  
Spending Cuts

Financial crises lead to substantial declines in output and consumption in emerging markets. The fact that fiscal policy is procyclical in these countries shows that the effects of a crisis are exacerbated by spending cuts and tax increases, which are usually attributed to borrowing constraints they face in bad times. This paper quantitatively analyzes the costs of reduced borrowing during crises by studying the effects of expansionary fiscal policies that would have been possible to implement, had the government been able to borrow more. The model shows that a 25% reduction of taxes on labor income, capital income, and consumption during the 1997 Korean crisis would have required an additional borrowing of 4.10% of GDP, while increasing output and consumption by 5.23 and 5.92 percentage points, respectively. When the effects of each tax rate are analyzed separately, labor tax reduction turns out to be more effective than the other policies.

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%.

scholarly journals Taxing Capital? Not a Bad Idea After All!

2009 ◽  
Vol 99 (1) ◽  
pp. 25-48 ◽  
Author(s):  
Juan Carlos Conesa ◽  
Sagiri Kitao ◽  
Dirk Krueger
Keyword(s):  
Income Tax ◽  
Labor Income ◽  
Income Shocks ◽  
Capital Income ◽  
Overlapping Generations Model ◽  
Cycle Structure ◽  
Tax Rate ◽  
Average Household Income ◽  
Optimal Capital

We quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic, uninsurable income shocks and permanent productivity differences of households. The optimal capital income tax rate is significantly positive at 36 percent. The optimal progressive labor income tax is, roughly, a flat tax of 23 percent with a deduction of $7,200 (relative to average household income of $42,000). The high optimal capital income tax is mainly driven by the life-cycle structure of the model, whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system. (JEL E13, H21, H24, H25)

TWO COMPUTATIONS TO FUND SOCIAL SECURITY

1997 ◽  
Vol 1 (1) ◽  
pp. 7-44 ◽  
Author(s):  
HE HUANG ◽  
SELAHATTIN İMROHOROGˇLU ◽  
THOMAS J. SARGENT
Keyword(s):  
Social Security ◽  
Income Tax ◽  
Physical Capital ◽  
Labor Income ◽  
Income Volatility ◽  
Public Provision ◽  
Tax Rate ◽  
Output Ratio ◽  
The Government ◽  
The Impact

We use a general equilibrium model to study the impact of fully funding social security on the distribution of consumption across cohorts and over time. In an initial stationary equilibrium with an unfunded social security system, the capital/output ratio, debt/output ratio, and rate of return to capital are 3.2, 0.6, and 6.8%, respectively. In our first experiment, we suddenly terminate social security payments but compensate entitled generations by a massive one-time increase in government debt. Eventually, the aggregate physical capital stock rises by 40%, the return on capital falls to 4.4%, and the labor income tax rate falls from 33.9 to 14%. We estimate the size of the entitlement debt to be 2.7 times real GDP, which is paid off by levying a 38% labor income tax rate during the first 40 years of the transition. In our second experiment, we leave social security benefits untouched but force the government temporarily to increase the tax on labor income so as gradually to accumulate private physical capital, from the proceeds of which it eventually finances social security payments. This particular government-run funding scheme delivers larger efficiency gains (in both the exogenous and endogenous price cases) than privatization, an outcome stemming from the scheme's public provision of insurance both against life-span risk and labor income volatility.

ENTREPRENEURIAL LABOR AND CAPITAL TAXATION

2010 ◽  
Vol 15 (3) ◽  
pp. 326-335 ◽  
Author(s):  
Catarina Reis
Keyword(s):  
Income Taxes ◽  
Income Taxation ◽  
Labor Income ◽  
Capital Taxation ◽  
Capital Income ◽  
Capital Income Taxation ◽  
Optimal Tax ◽  
Long Run ◽  
Capital Tax ◽  
The Government

This paper considers a Ramsey model of linear taxation for an economy with capital and two kinds of labor. If the government cannot distinguish between the return from capital and the return from entrepreneurial labor, then there will be positive capital income taxation, even in the long run. This happens because the only way to tax entrepreneurial labor is by also taxing capital. Furthermore, under fairly general conditions, the optimal tax on observable labor income is higher than the capital tax, although both are strictly positive. Thus, even though both income taxes are positive, imposing uniform income taxation would lead to additional distortions in the economy.

Optimal capital-income taxation in a model with credit frictions

2014 ◽  
Vol 0 (0) ◽  
Author(s):  
Salem Abo-Zaid
Keyword(s):  
Income Tax ◽  
Income Taxation ◽  
Capital Income ◽  
Capital Income Taxation ◽  
Tax Rate ◽  
Long Run ◽  
Redistributive Taxation ◽  
Optimal Capital ◽  
Credit Frictions ◽  
The Government

AbstractThe optimality of the long-run capital-income tax rate is revisited in a simple neoclassical growth model with credit frictions. Firms pay their factors of production in advance, which requires borrowing at the beginning of the period. Borrowing, in turn, is constrained by the value of collateral that they own at the beginning of the period, leading to inefficiently low amounts of capital and labor. In this environment, the optimal capital-income tax in the steady state is non zero. Specifically, the quantitative analyses show that the capital-income tax is negative and, therefore, the distortions stemming from the credit friction are offset by subsidizing capital. However, when the government cannot distinguish between capital-income and profits, the capital-income tax is positive as the government levies the same tax rate on both sources of income. These results stand in contrast to the celebrated result of zero capital-income taxation of Judd (Judd, K. 1985. “Redistributive Taxation in a Simple Perfect Foresight Model.”

Compliance Costs and the Tax Avoidance-Tax Evasion Decision

1988 ◽  
Vol 16 (1) ◽  
pp. 31-66 ◽  
Author(s):  
James Alm
Keyword(s):  
Tax Evasion ◽  
Tax Avoidance ◽  
Individual Choice ◽  
Tax Base ◽  
Tax Rate ◽  
Legal Method ◽  
Tax Reduction ◽  
Tax Complexity ◽  
Net Revenue ◽  
The Government

The analysis of the individual's choice of illegal tax evasion has typically ignored an alternative, legal method by which taxes can be reduced: tax avoidance. This article analyzes the joint individual choice of evasion and avoidance; it also examines optimal government policy in such a world. Its principal conclusion is that the existence of another channel for tax reduction alters many of the conclusions of the simpler evasion literature. Specifically, government policies that reduce evasion may not increase the tax base because avoidance may increase instead, and tax rate reductions may be a powerful tool for generating tax base increases because reductions make both evasion and avoidance less attractive. In addition, optimal government choices depend critically upon its objectives. The government selects larger values for its instruments when its goal is net revenue maximization or when those individuals who evade are not valued highly in its welfare function. It also appears that greater tax complexity generates more tax revenues.

scholarly journals Analisis fasilitas tarif pajak penghasilan terutang ditinjau dari penghasilan bruto

2021 ◽  
Vol 16 (3) ◽  
pp. 417-424
Author(s):  
Soko Wikardojo ◽  
Ahmad Mukoffi ◽  
Risnaningsih Risnaningsih ◽  
Adelsiana Lero Kaka
Keyword(s):  
Descriptive Analysis ◽  
National Development ◽  
Secondary Data ◽  
Primary Data ◽  
Tax Revenue ◽  
Tax Law ◽  
Tax Rate ◽  
Tax Reduction ◽  
Analysis Technique ◽  
The Government

National development is a sustainable development related to the whole life of society, nation, and state. National development is supported by several supporting aspects, one of which is tax revenue. This research aims to find out the facility of income tax rate payable in terms of gross income. The type of research used in this research is Interpretive Qualitative data. This Study uses data collection techniques, namely interview techniques, documentation, and observation. The types of data used in this stud are primary data and secondary data. The data analysis technique used is the descriptive analysis technique. The government issued tax law number 36 of 2008 by providing an incentive for tax reduction facilities for taxpayers, as stated in article 31E. The research results show that KPRI Universitas Brawijaya Malang has implemented Article 31E of the PPh Law Number 36 of 2008.

scholarly journals The Inequality Effects of a Dual Income Tax System

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Peter J. Lambert ◽  
Thor O. Thoresen
Keyword(s):  
Income Tax ◽  
Sufficient Conditions ◽  
Labor Income ◽  
Capital Income ◽  
Tax System ◽  
Tax Rate ◽  
Dual Income Tax ◽  
Clear Cut ◽  
Dual Income ◽  
Tax Payers

Abstract A dual income tax system, combining progressive taxation of labor income with proportional taxation of income from capital, may or may not be unambiguously inequality reducing. Examples show that the degree of correlation between the distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate a clear-cut analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction in certain cases, and more generally identifying the nature of the implicit redistribution between labor and capital income components which is sufficient to ensure overall inequality reduction.

The Effect of Taxation and Corruption on Firm Growth: An Empirical Investigation for Vietnam

2016 ◽  
pp. 5-29
Author(s):  
Bich Le Thi Ngoc
Keyword(s):  
International Development ◽  
Firm Growth ◽  
Empirical Investigation ◽  
Manufacturing Firms ◽  
Economic Management ◽  
Tax Rate ◽  
Percentage Point Increase ◽  
Percentage Points ◽  
Point Increase ◽  
The Impact

The aim of this study is to analyze empirically the impact of taxation and corruption on the growth of manufacturing firms in Vietnam. The study employed pooled OLS estimation and then instrument variables with fixed effect for the panel data of 1377 firms in Vietnam from 2005 to 2011. These data were obtained from the survey of the Central Institute for Economic Management and the Danish International Development Agency. The results show that both taxation and corruption are negatively associated with firm growth measured by firm sales adjusted according to the GDP deflator. A one-percentage point increase in the bribery rate is linked with a reduction of 16,883 percentage points in firm revenue, over four and a half times bigger than the effect of a one-percentage point increase in the tax rate. From the findings of this research, the author recommends the Vietnam government to lessen taxation on firms and that there should be an urgent revolution in anti-corruption policies as well as bureaucratic improvement in Vietnam.

Financial and monetary policy of the State and its impact on the income level and poverty reduction in Russia

2020 ◽  
Vol 26 (5) ◽  
pp. 964-990
Author(s):  
N.I. Kulikov ◽  
V.L. Parkhomenko ◽  
Akun Anna Stefani Rozi Mobio
Keyword(s):  
Monetary Policy ◽  
Household Income ◽  
Poverty Reduction ◽  
The State ◽  
Financial Policy ◽  
Gdp Growth ◽  
Tax Rate ◽  
Gdp Growth Rate ◽  
The Government ◽  
The Impact

Subject. We assess the impact of tight financial and monetary policy of the government of the Russian Federation and the Bank of Russia on the level of household income and poverty reduction in Russia. Objectives. The purpose of the study is to analyze the results of financial and monetary policy in Russia and determine why the situation with household income and poverty has not changed for the recent six years, and the GDP growth rate in Russia is significantly lagging behind the global average. Methods. The study employs methods of analysis of scientific and information base, and synthesis of obtained data. The methodology and theoretical framework draw upon works of domestic and foreign scientists on economic and financial support to economy and population’s income. Results. We offer measures for liberalization of the financial and monetary policy of the government and the Central Bank to ensure changes in the structure of the Russian economy. The proposed alternative economic and financial policy of the State will enable the growth of real incomes of the population, poverty reduction by half by 2024, and annual GDP growth up to 6 per cent. Conclusions. It is crucial to change budget priorities, increase the salaries of public employees, introduce a progressive tax rate for individuals; to reduce the key rate to the value of annual inflation and limit the bank margin. The country needs a phased program to increase the population's income, which will ensure consumer demand.

Sign in / Sign up

Export Citation Format

Share Document