Why are Inheritance Taxes Unpopular?

There is a puzzle over why inheritance taxes are unpopular relative to other taxes since they are progressive and, assuming they are spent wisely on welfare goods, more people should gain than lose through inheritance tax. I examine four reasons why inheritance tax might be unpopular (a) propaganda, (b) fiscal illusion, (c) framing and developing the latter (d) an evolutionary basis in human reasoning. The latter suggests that the relative popularity of a tax is related to how far the money taxed is already 'in the possession' of the person taxed. Given these reasons I make a suggestion and examine some proposal for making inheritance tax less unpopular.     

The Impact of the Philadelphia Beverage Tax on Prices and Product Availability

In recent years, numerous cities in the U.S. have enacted taxes on beverages to promote health and raise revenue. This paper examines the impact of Philadelphia's beverage tax, enacted in 2017, on the prices and availability of both taxed and untaxed beverages. Using original data we collected in late 2016 and again one year later, we estimate difference-in-differences regressions of the change over time in beverage prices and availability in stores in Philadelphia relative to stores in nearby counties. We find that, on average, distributors and retailers fully passed through the tax to consumers. Pass-through is higher for individual servings than for larger sizes. There is also heterogeneity in the pass-through rate among stores; it is greater among stores that are in higher-poverty neighborhoods, located farther from untaxed stores outside Philadelphia, and that are independent as opposed to part of national chains. We also find that the tax reduced the availability of taxed beverages and increased the availability of untaxed beverages, particularly bottled water, in Philadelphia stores.     

'Sharing the Proceeds of Growth': Conservative Economic Policy under David Cameron

Upon becoming Conservative leader, David Cameron, and his Shadow Chancellor, George Osborne, initially sought to compete with Labour by pledging increased expenditure on education and the NHS, and thereby insisting that tax cuts would have to wait. Rather than cutting taxation overall, the emphasis was on restructuring and simplifying Britain's tax system, and shifting the burden towards the better off, mainly thorough promoting environmental taxes. However, the economic collapse at the end of 2008 has prompted the Conservatives to modify this new economic stance, by insisting that they will no longer match Labour's planned increases in public expenditure, but, instead, will increase it at a lower rate. This is intended to reduce the need to increase government borrowing during the recession, and thereby ensure that when the economy recovers, the proceeds of economic growth can be shared between higher public expenditure and lower taxation, rather than being spent on repaying government debt for many years ahead.     

Public Capital Investment and Economic Growth in Forth Worth: The Implications for Public Budgeting and Infrastructure Management

There is a common assumption that local government investment in infrastructure stimulates private development. This article examines relationships in one southwestern city between public capital spending and city infrastructure assets and private economic activity as measured by building permit activity, permit values, and assessed property valuations. Two research questions are examined: (1) Is public investment in new capital associated with private capital formation? and (2) Is public investment associated with improvements in the property tax base? The findings hold implications for infrastructure planning, budgeting, and management. First, public and private capital spending patterns varied in tandem across several cycles, and tracking such cycles may help public managers predict short- and mid-term infrastructure needs. Second, utility capital spending is critically related to private capital formation, and may offer higher fiscal returns than other public infrastructure. Third, infrastructure capital had a strong significant effect on the assessed value of urban property, and will therefore influence the property tax base.     

Power and Policy Design: A Comparison of Green Taxation in Scandinavian Agriculture

This article demonstrates the political importance of policy design in overcoming the opposition to the use of green taxes directed towards producers. The purpose of the article is to establish the link between the political power of producers and policy design. It is argued that the more politically powerful they are, the more likely policy makers are to reimburse tax revenues, to give producers control over the spending of the revenue and to design tax schemes in which there is a direct relationship between the subject being taxed and pollution. A comparison of fertilizer and pesticide tax policy making in Denmark, Norway and Sweden supports this argument.     

A tragedy of the anticommons: local option taxation and cell phone tax bills

When multiple taxing jurisdictions overlap and fail to account for one another’s actions, they over-tax the common base. This is a prediction of the anticommons model, in which numerous parties have authority to exclude others from using a resource. This model further predicts that when governments over-tax the base, private parties will underutilize the resource, and underutilization will be greater as the number of parties with exclusion rights rises. We test these predictions by studying cell phone taxation and local option tax authority, which allows some cities, counties, and special-purpose districts to levy taxes on cell phone use. Consistent with theory, we find that the tax rate on cell phone service is higher when local governments have the option to tax. Further, the percentage of households owning cell phones is lower when there is the local option to tax, and ownership rates fall with the number of taxes levied.     

Policy analysis through microsimulation: the STATS model

This article gives a nontechnical introduction to a microsimulation model developed by the Social Security Administration to consider the effects of tax and benefit proposals on the economic status of population groups. This model, the Simulated Tax and Transfer System (STATS) model, uses information from a nationally representative survey of households to calculate taxes or benefits for thousands of persons or families, case by case. Then the model aggregates across individual cases to produce estimates for economic and demographic groups of interest to policymakers. Groups are defined by such characteristics as family income, age, sex, and marital status. The article explains the model's microsimulation approach and its emphasis on the economic status of population groups. It describes the procedures for simulating taxes and benefits and then illustrates the use of the model by considering a proposal to change the way Social Security benefits are taxed. The article also discusses the primary data source and the extent to which it limits the types of estimates that the model can produce.     

Guns vs. Taxes? A Look at How Defense Spending Affects U.S. Federal Tax Policy

Although studies have shown a theoretical and empirical link between defense spending and economic growth and between economic growth and tax policy, the impact of defense spending on federal tax policy remains largely unexplored. This paper proposes a theoretical model and empirical test to explore the direct and indirect effects of defense spending on federal tax policy. The findings suggest that consumption expenditures for national defense directly influence the federal corporate income tax rate. However, the analysis finds no indirect relationship between defense spending and federal tax policy mediated through economic growth.     

State Tax and Expenditure Limitations,Business Climate,and Economic Performance

The influence of state‐level tax and expenditure limitations on economic performance within the framework of the state's business climate is examined using a family of parametric and nonparametric tests of subsample equivalency. An index of tax and expenditure limitation strength or restrictiveness developed by Poulson is used to test for patterns in 84 separate measures of economic performance, business vitality, and development capacity. In general, we find no evidence that tax and expenditure limitations are associated with higher levels of economic performance or business climate. There is limited evidence that tax and expenditure limitations are associated with a poorer business climate and lower economic performance in some cases.     

G20 institutional transition and global tax governance

The G20 is in transition from a short-term crisis institution to long-term steering institution, adopting a new ‘G20 + established international organization’ governance approach. In this approach, the main role of the G20 is to set the agenda and build political consensus for global economic governance. The established international organization provides the technical support and facilitates proposal implementation, while the precondition for the G20 institutional transition is that the emerging economies need to participate on an equal footing with the advanced economies. The case of global tax governance is among the few success stories of the G20's institutional transition. Within the ‘G20 + OECD’ governance architecture, the G20 builds the political consensus that the profits should be taxed where they are performed, while the OECD proposes the technical Base Erosion and Profit Shifting Action Plan. In this way, the G20's political leadership and the OECD's technical advantage complement each other, making a giant leap in global tax governance.     

State income taxation with mobile labor

The ability of state and local governments to use tax and other fiscal policies to redistribute income may be limited when labor is mobile. An analysis of the allocative and distributional effects of a state income tax shows that, by driving out taxed households, the burden of the tax may be shifted to immobile households and other owners of immobile factors of production and may impose an excess burden on them. The NBER TAXSIM model is used to calculate state income tax burdens for representative high-income households in 1986–1988. Further calculations based on assumed demand elasticities for labor indicate that if high-income households are mobile, the marginal excess burden of income taxes imposed on them may be of substantial size in certain states, especially among the highest income groups.     

Economic Freedom and Taxation: Is There a Trade-off in the Locational Competition Between Countries?

This paper investigates the relationshipbetween economic freedomand taxation. We argue that an economicallyfree environment improvesthe attractiveness of a location, which, inturn, enables governmentsto levy higher business taxes. To test thishypothesis empirically, weestimate the impact of economic freedom onthe national tax policy,where the latter is measured by thecorporate tax revenue related toGNP (corporate tax ratio). We utilize adata set of 46 developed and lessdeveloped countries between 1980 and 1997and find a clear confirmationof our hypothesis. Further, a simulationanalysis reveals that the observedchange in economic freedom has equalizedthe international distributionof corporate tax ratios.     

Optimal Taxation,Economic Growth and Income Inequality

That there is a trade-off between equityand efficiency (economic growth) is wellknown. Two models have been developed thatlink government spending and taxation toeconomic growth. This paper uses thesemodels to provide estimates of thegrowth-maximizing tax rate. Then, a twoequation structural model is developed andestimated that is used to find thetrade-off rate between economic growth andincome inequality and the growth-maximizinglevel of income inequality for the UnitedStates over the period 1960–1990.     

Estimating property tax base elasticity over time: Evidence on the revenue maximizing politician

The Laffer curve analysis suggests a possible policy conflict between short-run revenue maximization and long-run fiscal health. This paper estimates short-run and long-run property tax base elasticity in order to test whether such a conflict exists for the property tax in central cities. A stock adjustment model is used and separate time-series estimates for four New York State central cities lend empirical support to such a conflict. The results show that while disincentive effects associated with property tax rate increases are not strong enough to reduce proeprty tax revenue in the short-run, they are substantial enough to reduce long-run revenue in all but one city. The paper also tests for asymmetric response to property tax rate changes and finds significant results for only one city.     

Unintended Consequences of Local Sales Tax: Capitalization of Sales Taxes into Housing Prices

Local governments are under pressure to look for alternatives to property taxes as their main revenue source. One response has been to adopt local sales taxes. Prior studies offer little guidance on whether and how much local governments enhance their revenue capacity with local sales taxes. This article unveils the underlying mechanisms by exploring the capitalization of sales taxes into housing prices as a property tax base measure. The empirical analysis reveals a capitalization of local sales taxes into housing prices, indicating the reduction of property tax bases in higher sales tax areas from the long-term perspective. The findings suggest that a sales tax rate increase might not raise local revenue capacity as much as policymakers intend.     

Political support and tax reforms with an application to Italy

In 2001 the Italian government introduced a personal income tax reform to be implemented in successive phases. In 2004 taxes were reduced to all income levels with higher gains for low-income and high-income individuals than for middle-income ones. A large debate arised. This paper explores the political economy reasons under this tax reform, mainly the attempt of the government to attract the uncertain voters (swing voters). A probabilistic voting model is introduced to capture the importance of swing voters. The model predicts that the average personal income tax rate tends to be lower for groups of lower income, higher preference for leisure and containing more politically mobile voters (swing voters). However, data from Italian polls show that, while the tax reform was a good strategy to attract swing voters, the specific design of the reform, which favored high-income and low-income individuals, but not the middle class, was not the more appropriate strategy.     

Broadening Benefits from Natural Resource Extraction: Housing Values and Taxation of Natural Gas Wells as Property

We study the effects of the property tax base shock caused by natural gas drilling in the Barnett Shale in Texas—a state that taxes oil and gas wells as property. Over the boom and bust in drilling, housing appreciation closely followed the oil and gas property tax base, which expanded the total tax base by 23 percent at its height. The expansion led to a decline in property tax rates while maintaining or increasing revenues to schools. Overall, each $1 per student increase in the oil and gas property tax base increased the value of the typical home by $0.15. Some evidence suggests that the cumulative density of wells nearby may lower housing values, indicating that drilling could reduce local welfare without policies to increase local public revenues.     

Tax Expenditure Budgets, Budget Policy, and Tax Policy: Confusion in the States

A tax expenditure budget should contribute to efficient and effective public decisions by quantifying the division in the tax structure between provisions that represent revenue policy (distribute the cost of government according to the legislated tax base) and parts that represent budget policy (substitute for direct spending). For this transparency to have the desired impact, however, the tax expenditure budget process and the direct expenditure process must be properly integrated and the tax expenditure budget must make an accurate division between the parts of the tax structure. A review of the 33 states with tax expenditure systems shows many weaknesses in application of the concept and poor linkage to the direct spending budget system. Their most significant flaw is in dividing the tax structure into normal and preference elements; states need greater attention to defining their basic tax structure if they are to have a meaningful tax expenditure budget.     

Comment on Jack Goodman's “houses,apartments, and the incidence of property taxes”

Abstract

Goodman finds from his analysis of the 2001 Residential Finance Survey that multifamily housing bears a higher effective property tax rate (EPTR) than single‐family owner‐occupied housing and argues that much of the differential is associated with the lower average property value of apartments. We offer comments on how this important research can be enhanced and analyze the EPTR by using a different database, the Public Use Microdata Sample (PUMS) of the decennial census.

Like Goodman, we find from the PUMS that the EPTR of multifamily housing is high relative to that of single‐family detached housing and that lower‐value multifamily housing has a higher EPTR relative to that of higher‐value multifamily units. We offer preliminary findings from the PUMS on the implications of the EPTR for development patterns (it may discourage smart growth), equity (the poor and minorities bear a higher tax burden), and housing (high EPTRs challenge affordability).     

Relationships between government size and economic growth: Japan's government reforms and evidence from OECD

This paper examines the relationship between government size and economic growth of 21 industrialized countries. Government size is measured by government final consumption expenditures and transfer payments. The relationship between government consumption is expected to increase GDP growth for developing countries, and reduce it for industrialized countries. Government consumption can contribute to increased economic growth. However, government consumption is likely to expand beyond an efficient level in industrialized countries. In contrast, transfer payments, and social welfare programs are likely to reduce economic growth for most countries. These programs reduce work incentives and encourage tax avoidance activities. Work disincentives and tax avoidance reduce economic growth. These expected relationships are consistent with economic performance and government size for the countries considered here. Inefficiency and excessive government growth are checked by voter feedback as tax burdens exceed the associated benefits. Unfortunately, government program costs and benefits are asymmetrically distributed. The resulting tendency is to expand government programs, particularly programs that benefit a majority of voters at the expense of a minority. This tendency becomes even more acute as the tax system becomes more progressive (i.e., tax burdens become concentrated. Reductions in government size are more likely with stagnant or declining economic growth, and in government programs whose costs are widely shared, compared to programs with widely shared benefits and narrowly shared costs.