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Author: Nada Eissa
Publisher:
ISBN:
Category : Labor economics
Languages : en
Pages : 37
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Book Description
A large literature evaluating the welfare effects of taxation has examined the role of the labor supply elasticity, and has shown that the estimated welfare effects are highly sensitive to its size. A common feature of this literature is its exclusive focus on hours worked and the associated marginal tax rate. An emerging consensus among public finance and labor economists, however, is that labor supply is more responsive along the extensive margin (participation) than along the intensive margin (hours worked). To understand the implications of the participation decision for the welfare analysis of tax reform, this paper embeds the extensive margin in an explicit welfare theoretic framework. It is shown that the participation effect on welfare is created by a different tax wedge than the marginal-tax wedge relevant for hours of work. This difference is due to non-linearities and discontinuities in tax-transfer schemes, features that are particularly important for the welfare evaluation of tax reforms affecting the bottom of the income distribution. We apply our framework to examine the labor supply and welfare effects for single mothers in the United States following four tax acts passed in 1986, 1990, 1993, and 2001. Our simulations show that each of the four tax acts reduced the tax burden on low-income single mothers, and created substantial welfare gains. We note three features of the welfare effects. First, we find that welfare gains are almost exclusively concentrated along the extensive margin of labor supply. Second, welfare effects along the extensive margin tend to dominate those along the intensive margin, even when the two labor supply elasticities are of similar size. This occurs because the welfare effect on each margin is created by a different tax wedge. Finally, ignoring the composition of the labor supply elasticity may reverse the sign of the welfare effect. In the welfare evaluation of tax reform, we conclude that the composition of the total labor supply elasticity is as i
Author: Nada Eissa
Publisher:
ISBN:
Category : Labor economics
Languages : en
Pages : 37
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Book Description
A large literature evaluating the welfare effects of taxation has examined the role of the labor supply elasticity, and has shown that the estimated welfare effects are highly sensitive to its size. A common feature of this literature is its exclusive focus on hours worked and the associated marginal tax rate. An emerging consensus among public finance and labor economists, however, is that labor supply is more responsive along the extensive margin (participation) than along the intensive margin (hours worked). To understand the implications of the participation decision for the welfare analysis of tax reform, this paper embeds the extensive margin in an explicit welfare theoretic framework. It is shown that the participation effect on welfare is created by a different tax wedge than the marginal-tax wedge relevant for hours of work. This difference is due to non-linearities and discontinuities in tax-transfer schemes, features that are particularly important for the welfare evaluation of tax reforms affecting the bottom of the income distribution. We apply our framework to examine the labor supply and welfare effects for single mothers in the United States following four tax acts passed in 1986, 1990, 1993, and 2001. Our simulations show that each of the four tax acts reduced the tax burden on low-income single mothers, and created substantial welfare gains. We note three features of the welfare effects. First, we find that welfare gains are almost exclusively concentrated along the extensive margin of labor supply. Second, welfare effects along the extensive margin tend to dominate those along the intensive margin, even when the two labor supply elasticities are of similar size. This occurs because the welfare effect on each margin is created by a different tax wedge. Finally, ignoring the composition of the labor supply elasticity may reverse the sign of the welfare effect. In the welfare evaluation of tax reform, we conclude that the composition of the total labor supply elasticity is as i
Author: Herbert Ernest Olivera
Publisher:
ISBN:
Category : Income tax
Languages : en
Pages : 528
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Book Description
Author: Michael J. Boskin
Publisher:
ISBN:
Category : Tax incidence
Languages : en
Pages : 74
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Book Description
Author: United States. Department of the Treasury. Office of the Secretary
Publisher:
ISBN:
Category : Income tax
Languages : en
Pages : 304
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Book Description
Author: United States. Department of the Treasury. Office of the Secretary
Publisher:
ISBN:
Category : Income tax
Languages : en
Pages : 428
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Book Description
Author: John E. Anderson
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Tax reforms over the past twenty-five years in the United States have dramatically altered the income tax system with numerous changes in base definitions and tax rates. With all of the changes that have taken place, including the most recent tax cuts in 2001 and 2003, interest in the effect of tax reforms on the distribution of the tax burden is at an all time high. This paper addresses the question by examining average tax rates (ATRs) over time at various points of the income distribution to see how tax reforms have had an impact in this measure of tax burden. To do so meaningfully, however, requires ATRs computed using a consistent measure of income developed by the IRS - the retrospective income concept. In this paper I review the reform efforts starting with the Economic Recovery Act of 1981 (ERTA81), reaching a high water mark with the Tax Reform Act of 1986 (TRA86), and continuing through the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA03). After review of these tax acts and their main features, simple time series models are estimated to examine the effects of the acts on average tax rates at various points of the income distribution. In each case, two models are estimated with a simple trend model and a model that includes a set of tax reform regime variables for the seven tax reforms since 1981. The paper concludes with a summary of the evidence on the effects of these tax reform acts on the distribution of ATRs across the income distribution.
Author: United States. Department of the Treasury. Office of the Secretary
Publisher:
ISBN:
Category : Income tax
Languages : en
Pages : 428
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Book Description
Author: Chamber of Commerce of the United States of America
Publisher:
ISBN:
Category :
Languages : en
Pages : 75
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Book Description
Author: Henry Aaron
Publisher: Brookings Institution Press
ISBN: 9780815707295
Category : Business & Economics
Languages : en
Pages : 544
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Book Description
The tax system profoundly affects countless aspects of private behavior. It is a powerful policy influence on the distribution of income and it is the one aspect of government that almost every citizen cannot avoid. With tax reform high on the political agenda, this book brings together studies of leading tax economists and lawyers to assess the various reform proposals and examine the effects of tax reform in several distinct areas. Together, these studies and comments on them present a balanced evaluation of professional opinion on the issues that will be critical in the tax reform debate. The book addresses annual and lifetime distributional effects, saving, investment, transitional problems, simplification, home ownership and housing prices, charitable groups, international taxation, financial intermediaries and insurance, labor supply, and health insurance. In addition to Henry Aaron and William Gale, the contributors include Alan Auerbach, University of California, Berkeley; David Bradford, Princeton University; Charles Clotfelter, Duke University; Eric Engen, Federal Reserve; Don Fullerton, University of Texas; Jon Gruber, Massachusetts Institute of Technology; Patric Hendershott, Ohio State; David Ling, University of Florida; Ronald Perlman, Covington & Burling; Diane Lim Rogers, Congressional Budget Office; John Karl Scholz, University of Wisconsin; Joel Slemrod, University of Michigan; and Robert Triest, University of California, Davis.
Author: Ms.Katherine Baer
Publisher: International Monetary Fund
ISBN: 1451980396
Category : Business & Economics
Languages : en
Pages : 37
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Book Description
Building on previous FAD work in the tax administration field, this paper defines broad criteria for diagnosing the problems in a country’s tax administration and formulating an appropriate reform strategy. To be effective, this strategy should be based on the size of the tax gap and the country’s particular circumstances. This paper discusses some guiding principles which have provided the basis for successful reforms, including: reducing the tax system’s complexity, encouraging taxpayers’ voluntary compliance, differentiating the treatment of taxpayers by their revenue potential, and ensuring the reform’s effective management. Also discussed are specific bottlenecks that hinder the effectiveness of the tax administration’s operations.
