Heterogeneity in Tax Rate Elasticities of Capital: Evidence from Local Business Tax Reforms

2017 ◽  
Author(s):  
Inga Bethmann
Keyword(s):  
Tax Reforms ◽  
Tax Rate ◽  
Local Business ◽  
Business Tax

scholarly journals Is NY's Supply-side Experiment Working? A Preliminary Analysis using County Unemployment Rates

2018 ◽  
Vol 10 (3) ◽  
pp. 245-266
Author(s):  
Lynn B. Snarr ◽  
Hal Snarr ◽  
Dan Friesner
Keyword(s):  
New York ◽  
The State ◽  
Tax Rates ◽  
Free Enterprise ◽  
Corporate Tax ◽  
Tax Reforms ◽  
Tax Rate ◽  
Start Up ◽  
Level Data ◽  
Business Tax

The State of New York recently enacted business tax reforms. The first legislative act launched the START-UP NY program in 2014. It created tax free enterprise zones throughout the state to incentivize business incubation within, or relocation of existing firms to, the State of New York. In that same year, the state lowered its corporate tax rate state-wide from 7.1% to 6.5% in 2016. We use a difference-in-differences (DID) methodology, evaluated using county-level data, to empirically test whether New York’s recent business tax reforms significantly reduce unemployment, beyond what would exist in the absence of the reforms. We fail to find significant evidence that START-UP NY affects unemployment during the period studied, 2014-2017.  We do, however, find evidence suggesting that New York lowering its corporate tax rates in 2016 is associated with a large reduction in unemployment (by approximately 90,000 jobs) in 2016 and a smaller reduction (by approximately 25,000 jobs) in 2017.

scholarly journals The Tax-rate Elasticity of Local Business Profits

2018 ◽  
Vol 19 (2) ◽  
pp. 162-189 ◽  
Author(s):  
Frank M. Fossen ◽  
Viktor Steiner
Keyword(s):  
Tax Revenue ◽  
Fiscal Equalization ◽  
Tax Rate ◽  
Significant Bias ◽  
Local Business ◽  
Business Tax ◽  
The Universe ◽  
Return Data

Abstract Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a 1% increase in the LBT rate decreases the LBT base by 0.45%, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using tax revenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.

Is the Local Business Tax a User Tax? An Empirical Investigation for Germany / Ist die Gewerbesteuer eine Äquivalenzsteuer? Eine empirische Analyse für Deutschland

2001 ◽  
Vol 221 (1) ◽  
Author(s):  
Clemens Fuest ◽  
Regina Riphahn
Keyword(s):  
Local Governments ◽  
Fiscal Federalism ◽  
Public Expenditures ◽  
Tax Rate ◽  
Business Taxes ◽  
Positive Effects ◽  
Local Business ◽  
Financial Pressure ◽  
Business Tax ◽  
Congestion Effects

SummaryThe theory of fiscal federalism argues that local governments should only tax mobile tax bases for the purpose of charging user taxes which correct for congestion effects. Empirically, we observe that local governments do levy taxes on mobile bases. In Germany, this is the local business tax (Gewerbesteuer). Since such taxes are efficient only if they are raised to cover congestion effects, the justification for these taxes usually put forward is that they serve as user taxes. This paper tests empirically whether that justification holds for the case of German local business taxes. Our findings do not support the user tax argument. Instead, our results suggest that local governments use the local business tax as a source of revenue for general public expenditures. Our empirical analysis finds statistically significant positive effects of changes in expenditures for social assistance and interest payments on subsequent tax rate changes. Our results are thus consistent with the view prevailing in the literature according to which local business tax rates are set in response to general financial pressure in local government budgets.

Gestaltungsmöglichkeiten der Stadtstaaten bei gegebener Steuersatzautonomie für die Körperschaftsteuer

2008 ◽  
Vol 59 (1) ◽  
Author(s):  
Michael Broer
Keyword(s):  
Tax Revenue ◽  
Tax Base ◽  
Tax Rate ◽  
Corporation Tax ◽  
Federal States ◽  
Local Business ◽  
Business Tax ◽  
City States ◽  
Statutory Tax Rate ◽  
The City

SummaryGerman corporate companies are taxed with a federal corporation tax and with a local business tax. The latter has a similar, but broader tax base (including e. g. 25 % of interest payments) and its tax rate is set independently by every municipality including the so called city-states (Stadtstaaten). The federal corporation tax revenue is equally split between the federal government and the federal states (Länder). Till now the federal tax rate has been fixed by the German government. Federal states have not had the right to rule the tax rate of their share of corporation tax. At present a federal commission is discussing whether this should be possible in the future. Once granted this privilege, the city-states will be able to substitute their part of corporation tax by a higher local business tax. Furthermore, because of its broader tax base, there will be a reduction of the statutory tax rate for corporations without a decrease in tax revenue. This paper analyses the revenue effects of this substitution for the city-states taking into account the German fiscal equalization system and the incentive of profit shifting to the city-states. The analysis shows some positive revenue effects to the city-states, if they will substitute their part of corporation tax by a higher local business tax. The revenue effects are subject to different scenarios and add up to 17.5 million for Hamburg, 10.4 million for Berlin and 3.6 million for Bremen.

scholarly journals Does Cutting the Tax Rate to Zero Induce Behavior Different from Other Tax Cuts? Evidence from Pakistan

2020 ◽  
Vol 102 (3) ◽  
pp. 426-441 ◽  
Author(s):  
Mazhar Waseem
Keyword(s):  
Low Income ◽  
Tax Evasion ◽  
Tax Reforms ◽  
Middle Income ◽  
Tax Rate ◽  
Taxable Income ◽  
Administrative Records ◽  
The Difference ◽  
Wage Earners ◽  
Tax Cuts

Using a series of Pakistani tax reforms and administrative records, I document that taxable income responses induced by to-zero tax cuts are orders of magnitude larger than ones induced by similar-sized other cuts. This finding is remarkably robust to alternative specifications and holds for both the self-employed and wage earners. I explore salience, selective enforcement, and discontinuous evasion costs as explanations of the observed behavior. I find that the data favor the last explanation. The difference between the two sets of responses is primarily driven by a large, discrete tax evasion response, which is included in the former but not in the latter behavior. I estimate the difference as a lower bound on tax evasion, showing that at least 70% of the income of low- and middle-income self-employed and 1% of low-income wage earners goes unreported.

Tourism and urban economic growth: A panel analysis of German cities

2019 ◽  
Vol 26 (3) ◽  
pp. 519-527 ◽  
Author(s):  
Bart Neuts
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Income Tax ◽  
Tax Revenue ◽  
Wealth Creation ◽  
Urban Economic ◽  
Real Gdp ◽  
Local Business ◽  
Business Tax ◽  
German Cities

Even though cities are among the most important tourist destinations, research on tourism as a vehicle for economic growth – most often approached via the tourism-led growth hypothesis (TLGH) – has predominantly been limited to countries. This study explores the validity of the TLGH in an urban context. Panel data were collected for 89 German cities on different indicators of urban economic growth. Pedroni panel cointegration confirmed a long-term equilibrium between tourism, local business tax revenue, income tax revenue and real GDP, indicating that even for cities within a strong, developed economy, tourism contributes to wealth creation. A Panel Granger causality analysis established a one-way Granger causal relationship from tourism to local business tax and income tax and a bidirectional relationship between tourism and real GDP. This causal relationship was stronger for cities with a high to medium tourism intensity.

scholarly journals Tax Policy and Income Inequality in the Visegrad Countries

2015 ◽  
Vol 61 (6) ◽  
pp. 12-18
Author(s):  
Anna Moździerz
Keyword(s):  
Income Inequality ◽  
Tax Policy ◽  
Negative Impact ◽  
The State ◽  
Consumption Tax ◽  
Tax Reforms ◽  
Tax Rate ◽  
Recent Financial Crisis ◽  
The Impact ◽  
Visegrád Countries

Abstract The financialisation of economies is believed to be the primary cause of the increase in income inequality in the world, occurring on a scale unseen for more than 30 years. One can hypothesise that it is the state that is responsible for the widening inequality, as the state has not sufficiently used the redistributive function of taxation. The purpose of this paper is to study the impact of tax policy on income inequality in Poland, the Czech Republic, Slovakia and Hungary. These so-called Visegrad countries have, in the last several years, carried out some controversial experiments with tax policy, specifically in terms of the flattening of tax progressivity or its replacement with a flat tax, which led to the weakening of the income adjustment mechanism. The imbalance between income tax and consumption tax has contributed to perpetuating income inequality. The verification of tax systems carried out during the recent financial crisis has forced the countries included in this research to implement tax reforms. The introduced changes caused various fiscal and redistributive effects. Analyses show that the changes in income taxation and an increase in the consumption tax rate had the most negative impact on the income and asset situation in Hungary.

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