Performance measures in tax administration: Chile as a case study

The article proposes a set of tax administration performance measures and contrasts them with measures actually used by the Chilean tax administration agency. The goals assumed for the tax administration agency (TA) are to maximize tax revenue collection and provide quality services to taxpayers. Ideal performance measures (PMs) would measure the deviation of actual outcome from a best‐practice standard, given the value of all variables affecting organisation performance that are outside management control. The key challenge is to build and calculate these best‐practice outcomes. In Chile the PM in use, for the first goal, is the ratio of actual to potential tax revenue collection. This PM does adjust revenue collection for variations in the tax structure and rate, but it fails to control other variables that affect performance such as the TA budget and per capita income. The PM in use, for the second goal, is taxpayer satisfaction measured through sample surveys. This seems the appropriate PM, as quality of taxpayer services depends directly on the TA efforts to improve them. Copyright © 2005 John Wiley & Sons, Ltd.     

Is There a “Singles Tax”? The Relative Income Tax Treatment of Single Households

The existence of a "marriage tax," in which many married couples pay more taxes when married than their combined taxes as single individuals, is well known. However, largely lost in the attention devoted to married taxpayers is the treatment of single taxpayers. This article examines the relative tax treatment of single and married taxpayers. Various types of representative taxpayers are constructed, and the difference in income taxes paid by single taxpayers and married taxpayers is calculated. These calculations show that there is a "singles tax"; that is, a single individual typically pays a greater income tax liability than a married couple with identical income, especially when the main transfer programs are considered.     

The spatial distribution of public services: A structural model of voting,educational production,and the government's allocation of educational inputs

This essay analyzes the intrajurisdictional allocation of public resources by a governmental agency, using education as the example. The agency's decision is guided, in part, by the pReferences of voters within each subarea of the jurisdiction. Voter's choices are influenced by the likely allocation of additional resources resulting from passage of a tax levy, and the tax cost of the levy. After deriving predictions of the relationships between the variables of the model, we estimate a simultaneous equation system. Included are equations specifying the educational production function, voting decisions, and bureaucratic resource allocation. This essay also notes the biases present in prior studies that only considered the ‘demand side’ of voting models.     

Tax Code Knowledge and Behavioral Responses Among EITC Recipients: Policy Insights from Qualitative Data

We build on the robust quantitative literature on behavioral responses to the Earned Income Tax Credit (EITC) by using in‐depth qualitative interviews with 115 EITC recipients to examine how they understand and respond to its incentive structures regarding earnings, marriage, and childbearing. We find that respondents consider their tax refund as a whole, without differentiating the portion from the EITC; as a result, they cannot predict how their EITC refund would change if they altered their labor supply or marital status. Incentives for childbearing are better understood, but are not specific to the EITC; rather, parents respond to a combination of tax deductions and credits as a whole. Respondents would like to maximize their refunds, but most cannot or would not alter their behavior due to structural constraints they face in the labor and marriage markets. Rather than adjust work hours, defer marriage, or have additional children, respondents exhibit a different type of behavioral response to the incentive structure of the EITC: They alter their tax filing status in order to maximize their refunds. They routinely claim zero exemptions and deductions on their W‐4s, file their tax returns as head of household rather than as married, and divide children among the tax returns of multiple caregivers. Although some of these behaviors qualify as tax noncompliance, they emerge because the intricacies of the tax code conflict with the complexity and fluidity of finances and family life in low‐income households.     

State Government Expenditure Determinants and Tax Revenue Determinants Revisited

The primary aim of the research was to test the general hypothesis that many institutional and political variables affect fiscal outcomes; that the preferences of public officials, and the decision processes used to act on those preferences, matter. State government data (state only, not state and local) from 1980, 1985, and 1990 were used to specify state tax revenue and expenditure models. A previous (Merrifield, 1991) state tax revenue model identified many significant institutional and political variables, but it was based only on 1985 data (49 observations). The larger data set (147 observations), including better data for some of the variables, indicated that most of Merrifield's (1991) findings are robust. The state expenditure models facilitated a second test of the general institutional and political variable hypothesis, as well as the hypotheses about specific variables. The expenditure model also facilitated comparisons of expenditure and tax determinants, and comparisons with results published in the literature. Though there are some noteworthy differences between the expenditure and tax models, the expenditure models also supported many of the institutional and political variable hypotheses.     

Administering Romance: Government Policies Concerning Pre-marriage Education Programs

Recent policy objectives surrounding the institution of marriage are based on strategies aimed at sustaining a stable and morally cohesive society. Policy-makers disapproving of marriage breakdowns often focus on the behaviour of individuals to explain the breakdowns. Policy initiatives seek to 'cure' individuals to overcome the problem of marriage failure. Pre-marriage education programs encourage self-help and depend on individuals solving their own problems. I argue in this paper that this rational view of marriage is flawed because it does not engage with the issue of romance. This is an important concern to administrators because romance often plays a central role in partner choice and people's expectations of marriage. Policy-makers either ignore romance or treat it as a myth to be countered; they rarely discuss how it influences a couple's decision to marry in the first place. I argue that romance should not be dismissed so easily as it plays a significant role in gender relations. Acknowledging romance ought to be a significant part of administering marriage education programs.     

Revisiting the Income Tax Effects of Legalizing Same‐Sex Marriages

In this paper we estimate the impacts on income tax collections of legalizing same‐sex marriage. We utilize new individual‐level data sources to estimate the federal income tax consequences of legalizing same‐sex marriages. These data sources also allow us to estimate the impact of legalization on state income tax collections. We find that 23 states would realize a net fiscal benefit from legalization, while 21 states would experience a decline in revenue. The potential (annual) changes in state tax revenue range from negative $29 million in California to positive $16 million in New York. At the federal level, our estimates suggest an overall reduction in revenues, ranging from a potential loss of $187 million to $580 million. Overall, we find that the federal and state impacts are quite modest. We also find that our estimates are only marginally affected by alternative assumptions about how many same‐sex couples will choose to marry and which partner will claim any children for tax deduction purposes.     

Designing a Property Tax Reform Strategy for Sub-Saharan Africa: An Analytical Framework Applied to Kenya

Countries throughout Sub-Saharan Africa are exploring options to improve local property taxation. Using the case of Kenya, this article provides an analytical framework for designing an effective property tax reform strategy. The first section presents a general conceptual model of property tax revenues, identifying four critical ratios that ultimately determine the effectiveness of any property tax system—namely, the coverage ratio, the valuation ratio, the tax ratio, and the collection ratio. The second section applies this conceptual framework to the property tax system in Kenya, focusing on the status of these four ratios and outlining possibilities for improving each ratio. The article concludes by summarizing five basic lessons from the Kenyan analysis that can assist in the development of appropriate property tax reforms in other developing countries in Sub-Saharan Africa.     

Labor trajectories and reproductive behavior: a comparison between Mexico and Spain

Data from the 1987 Mexican National Survey of Fertility and Health and the fertility survey carried out by Spain's National Institute of Statistics in 1985 were the basis for a comparison of the fertility histories and labor force participation of women of different cohorts in the two countries. Both surveys included questions on employment before marriage, between marriage and the birth of the first child, and at the present time. Eight combinations were possible, including continuous employment in all three periods and no history of employment in any period. The survey populations included women ever married or in union, with at least one live-born child, and aged between 15 and 49 years for Mexico and 18 and 49 years in Spain. Economic conditions in Mexico and Spain are dissimilar, and women's labor force participation patterns have varied as well. The Mexican survey indicated a current labor force participation rate of 37% for women aged 20-49. 42% of women aged 30-39 were employed. In Spain, 43% of women aged 18-49 were economically active. Around 60% of widowed, divorced, separated, and single women were employed. In Mexico, 38.2% of respondents had not worked in any of the three periods, 20.4% had worked in all three, and 17/7% had worked only before the first marriage or union. 61.5% of Mexican respondents had worked in at least one of the three periods. The cohort born in 1957-61 appears to be transitional to a pattern in which work outside the home assumes greater importance. In Spain, 31.3% of respondents had worked only before the first marriage or union, 24.8% had never worked, and 23.7% had worked in all three periods. 75.2% had worked in at least one of the three periods. The older Spanish cohorts had lower rates of labor force participation and the younger cohorts tendered to have higher activity rates, combining motherhood and outside employment to a greater extent. The cohort aged 25-29 at the time of the survey, which had a high proportion of women working continuously in the three periods and an intense activity rate at the time of the survey, appeared to be the transitional cohort between traditional and modern lifestyles. Thus, in both countries the cohorts aged 25-29 were those which managed to combine childbearing with employment to the greatest extent. In both Mexico and Spain,, the women within the cohort aged 25-29 with the highest activity rates were those with higher levels of education and those living in larger cities.     

Economic Actors' Political Activity in 'Overlap Issues': Privatisation and EU State Aid Control

This article considers the political activity of economic actors in what we refer to as 'overlap issues'. The cases examined here are the domestic level privatisation policy-making processes in Spain, France and Ireland, and the subsequent European Commission decisions on state aids given during the sales. Although the influence of economic actors is crucial in understanding the domestic-level privatisation aid negotiations, such actors' participation is absent in the supranational decision-making process. In order to explain this limited political activity of firms at the EU level, attention is focused on both the role of the member states and the paradoxes in EU policies that simultaneously guide and constrain the Commission from making a decision against capital.     

Preparing members of congress to make binary decisions on complex policy issues: The 1986 tax reform bill

Throughout 1985 and 1986, the House Committee on Ways and Means undertook a major revision of the federal income tax law. The product was the landmark Tax Reform Act of 1986. Because of the magnitude of the changes contained in this bill, the committee sought new ways of obtaining and disseminating necessary information. This article discusses the congressional policy-making process, the different kinds of information used in congressional decision making, and some new procedures employed by the committee during House action on the 1986 tax reform legislation.     

State Income Tax Treatment of the Elderly

The state and local tax treatment of the elderly varies significantly from state to state. In this article, we analyze the differences in effective tax rates for the state personal income tax for elderly versus non-elderly taxpayers. We find that in a majority of states, the average effective tax rate facing the elderly is significantly lower than that of non-elderly taxpayers. The consequences of this tax rate difference may impact long-term state income tax revenues as the elderly population continues to grow.     

An Analysis of the Time to Adoption of Local Sales Taxes: A Duration Model Approach

The timing of the decision of local governments to adopt a local sales tax is explored in a duration model with time‐varying covariates. Our framework suggests a set of factors associated with the decision to adopt a local sales tax and we find empirical support for these factors. We also consider whether the adoption by one jurisdiction depends on the adoption by neighboring jurisdictions and find empirical support for interdependency of behavior.     

Do high taxes lock-in capital gains? Evidence from a dual income tax system

The purpose of this paper is to study whether investors’ willingness to realize capital gains falls when the marginal tax rate on capital gains is raised. We use a rich register-based panel data set covering almost 8% of the Swedish population. The results indicate that a 10% increase in capital gains tax rate reduces the number of realizations of capital gains with 8.7% and the realized amount, given the decision to realize, with 1.9%. In addition, we find that wealthy individuals seem to respond more to changes in capital gains tax rates than less-wealthy.     

Conservative Party Modernisation and David Cameron's Politics of the Family

A key feature of David Cameron's electoral appeal is his carefully cultivated image as a ‘family man’. Cameron has repeatedly stressed the importance of the family to his political views and stated his desire to see marriage rewarded through the tax system. At the same time, Cameron has presented himself as a modernising leader, keen to demonstrate that he and his party are in touch with contemporary society. Central to this effort to detoxify the Conservative brand has been an emphasis on social liberalism. The potential conflict between these two objectives reflects the division in the party between social liberals and traditionalists, which has become increasingly apparent over the past decade. This article examines Conservative party policy and rhetoric on social and moral issues since 1997, particularly gay rights and family policy. It notes that a significant divide remains in the Conservative party between social liberals and traditionalists, so in this respect Cameron's modernisation project remains far from complete.     

Is the Tax Collection Effort an Indicator of the Financial Condition of Spanish Municipalities?

ABSTRACT

The financial crisis beginning in 2007 drastically affected the financial resources of different governmental organizations, causing critical imbalances between resources and expenditure needs. This study aims to analyze whether the municipal tax collection effort in Spain could be an indicator of the financial condition of these institutions. As a preliminary step, a new methodology is used to assess their financial condition. We test tax collection effort as an indicator on a sample of more than 5,000 Spanish municipalities with fewer than 75,000 inhabitants. Results confirm that the budgetary solvency dimension is associated with the tax collection effort for all municipalities studied. Furthermore, in municipalities with populations of fewer than 5,000 inhabitants, the level of the tax collection effort is indicative of most of the financial condition dimensions.     

Do Industrial Tax Abatements Spur Property Value Growth?

Despite ongoing debate regarding the effectiveness of tax abatements, Michigan's Industrial Facilities Tax (IFT) abatement program has been widely and extensively used to boost local economic development. In this article, we estimate the effects of industrial property tax abatements on industrial, residential, and commercial property value growth in the context of regional competition for a panel of 152 communities in the five counties surrounding Detroit from 1983 through 2002. We find that: (1) offering tax abatements yields statistically significant positive impacts on industrial property value growth; (2) the impacts are larger in high tax than in low tax communities; (3) there are positive spillover effects of industrial tax abatements on residential and commercial property value growth; (4) tax abatements offered in competitor communities do not appear to influence own industrial property value growth; and (5) changes in the own as well as competitor property tax rates are important determinants of industrial property value growth. However, the fiscal benefits of tax abatements are quite small as compared with the costs of offering abatements even when spillover benefits to residential and commercial properties are considered.     

The effects of state R&D tax credits in stimulating private R&D expenditure: A cross‐state empirical analysis

This is a cross‐state empirical study which examines the effects of state research and development (R&D) tax credits on private R&D expenditure in the states. Other explanatory variables include federal R&D subsidies, public services in higher education and R&D‐targeted programs as well as other control variables. The statistical result shows that the establishment of state R&D credit programs is effective in stimulating more industrial R&D expenditure. In addition, state services in higher education and R&D‐targeted programs also matter in private decision of R&D investment. This policy assessment sends a positive message to state policymakers because it shows the great potential in using R&D policy instruments to promote innovation‐based economic development. © 2005 by the Association for Public Policy Analysis and Management     

Public Opinion and the Role of Government Arts Funding in Spain

While several studies have probed the determinants of public support for government funding of arts and culture in the United States, little work to date has addressed the question in Europe. Yet as private cultural funding increases in magnitude in most Western European countries, the answer to this question has policy implications. This article formalizes the theory of the determinants of this public support in a model, employs public opinion data from Spain to estimate this model, and compares the results with those from the U.S. I find that support in Spain increases strongly with age, but is insignificant in most other variables. The article's empirical results yield several lessons for cultural policy design.     

Insuring legislative wealth transfers: theory and evidence

Authorities rely on reports from private citizens to detect and enforce more than a trivial portion of effective law-breaking. The present article is the first to study the cultural aspect of peer reporting experimentally. By collecting data in a post-Soviet country (Moldova), we focus in particular on how the Soviet legacy of using citizens as private informants may have a long-lasting effect on their willingness to cooperate with state authorities. We then contrast those effects with peer reporting behavior in France, a Western society. Our results suggest that participants in Moldova view cooperation with authorities as less socially acceptable than their counterparts in France. Our results also suggest that participants in Moldova engage less frequently in peer reporting than individuals in France. However, we also find that less peer reporting does not necessarily imply less tax compliance. Participants in both countries exhibit very similar tax compliance rates. We explain the effect of peer reporting on tax compliance in Moldova using the country's past experience during the Soviet era, when being reported to authorities was common and carried grave consequences.