The "common sense" of the nonprofit hospital tax exemption: a policy analysis.

Although rarely discussed prior to the 1985 Utah Supreme Court ruling against Intermountain Health Care Inc., the question of whether to grant tax exemptions to nonprofit hospitals is currently being debated by federal, state, and local legislators, and by the courts. Changes to current policy seem likely. This policy analysis: (1) presents the historical and legal background; (2) examines the economic, political, and organizational implications of current tax-exemption policy; and (3) offers three alternatives to this current policy. The analysis indicates that the current policy provides little incentive for nonprofit hospitals to make contributions of charity care. Of the alternatives, eliminating the exemption is not politically feasible at this time; regulating hospital operations and outputs portends an implementation nightmare; and tying tax subsidy levels to output levels of charity care--perhaps the strongest and most efficient incentive--would require an unlikely political consensus on what constitute valid and reliable measures of charity care. If there is a movement toward subsidies, then linking subsidy amounts to levels of charity care will depend on whether policy analysts can design satisfactory empirical measures. With the advent of universal health coverage, the demand for charity care will decrease. The problem for tax-exempt hospitals will then become justifying the exemption by demonstrating the extent to which they generate community benefits at no or reduced cost to society.     

Interest group demand for taxation

Researchers have typically ignored the determinants of the tax structure of the public sector. Political scientists have concentrated their analyses on the expenditure side of the public ledgers while economists have avoided the issue by assuming that taxes are exogenously determined. In this paper we have shown that a behavioral model of political interest groups can be employed to gain insights into the political selection of taxes. The theory provides a general complement to the well-documented analysis of special interest demand for public expenditures.Our analysis raises several important policy questions. First, is the influence of interest groups on the determination of tax systems desirable from a public policy perspective? For example, special interest groups dominated by high and middle income individuals may prefer regressive tax systems which reduce their own tax burden. Certainly the impact of interest groups on the well-known regressivity of state and local tax systems is an area worthy of additional investigation.     

税收负担、公共品层次与私人公共品需求——以山东省面板数据为例

个人税收负担的增长会对公共品需求产生负向影响,这一结论在西方的研究中被普遍证明。本文从中国实际出发,借助经典的中位选民模型,考察了个人税收负担对公共品需求的影响。通过对山东省17市1997～2007年的面板数据进行实证分析,发现个人税收负担对公共品需求的负向影响在中国并不普遍存在。就影响公共品需求的各因素来看,公共品需求的收入弹性以及人口拥挤效应普遍存在;个人税收负担对济南、烟台两市一般公共品需求产生负向影响,对其余15个市产生正向效应。为进一步揭示税收负担对不同层次公共品需求的影响差异,选取了教育和公共安全这两类特殊公共品进行研究。山东省17地市的个人税收负担对教育这类公共品普遍产生负向影响;对公共安全类公共品产生完全正向效应。因此,本文认为山东省一般公共品市场是供给导向的市场,税收弹性与公共品需求层次相关,建议建立引导公民合理表达公共品需求意向机制。     

Parental schooling choice: A case study of minnesota

Public support of nonpublic elementary and secondary education has become one of the most controversial issues in American educational policy, with tuition tax credits and deductions subjects of ongoing debate at both the state and federal level. This article presents the results of one of the first empirical investigations of how a tax subsidy for tuition costs actually influences parents' school choices using data from Minnesota, the first state to have a tuition subsidy pass judicial review at all levels. It should be uyseful to policy makers, researchers, adn practitioners who are concerned with how parents make schooling decisions on behalf of their children, and how tax subsidies for educational expenses might affect those choices.     

Wage subsidies as a labour market policy tool

In this paper, the author argues that wage subsidy is a valuable policy tool in the face of structural changes such as would result from the removal of tariffs, or in the face of a need to assist the disadvantaged or redress distributional inequity. After discussing wage subsidies that target specific segments of the population, which has the potential to improve both static and dynamic efficiency, the author goes on to discuss and contrast his universal wage subsidy proposal with the negative income tax and the minimum wage legislation, all of which are designed mainly for distributional purposes.     

After the Public Interest Prevails: The Political Sustainability of Policy Reform

The prevailing political science wisdom is that narrow interests regularly triumph over the general public. Yet the stunning passage of broad-based policy reforms in the face of intense clientele opposition suggests that the U.S. political system has a greater capacity to serve diffuse interests than has often been thought. Some of the most provocative policy-oriented political-science research during the 1980s and 1990s examined how these surprising reform victories occurred. Unfortunately, general-interest reforms do not always stick; reforms may be corrupted or reversed after their enactment. The long-term sustainability of any given policy reform hinges on the successful reworking of political institutions and on the generation of positive policy-feedback effects, especially the empowerment of social groups with a stake in the reform&s maintenance. This paper explores the postenactment dynamics of three canonical instances of general-interest reform legislation: tax reform, agricultural subsidy reform, and airline deregulation. Only in the airline-deregulation case has the self-reinforcing dynamic required for political sustainability been unmistakably evident. For analysts and advocates of general-interest reform measures alike, the clear lesson is to attend far more closely to what happens after reforms become law.     

Local government grants and income tax revenue: Redistributive politics in Norway 1900–1990

An important aspect of the welfare state is public provision of private goods, primarily education and health care. In Norway the provision of these services has been organized through the local public sector. The development of the welfare state has to a large extent been the development of welfare communes. The important revenue sources of the local and county governments, grants and income tax revenue, have been controlled nationally, and the paper addresses the determinants of these revenues during 1900–1990. The approach combines a demand model of local public services emphasizing price and income-elasticities with a political economy model of central government ideology and strength. The decision making is understood as bargaining between the government and interest groups, and the political structure consequently is of importance for the policy outcome. The analysis shows how politics matter, and the results indicate that a minority coalition government implies 30% more grant and income tax revenue to local and county governments than one party majority in the long run.     

Voluntary purchase of public goods

This paper examines the application of Buchanan's ‘independent adjustment’ model of public good provision to individual donations to voluntary or non-profit organizations. An individual's donation function is a simple transformation of the Marshallian demand function; consequently donation functions ‘reveal,’ in principle, preferences for public goods. The existence of a tax-subsidy system sustaining a Pareto optimal level of provision is demonstrated, and the relationship to the existing subsidy scheme in the U.S. is examined. Finally, two implications of the model suggest that it is not appropriate as a representation of actual donor behavior.     

How Pollution Taxes may Increase Pollution and Reduce Net Revenues

This paper develops a positive theory of pollution taxation by a federal authority when pollution abatement subsidies are used by local governments. Environmental and industry lobby groups influence governments with campaign contributions. First, pollution may increase in the pollution tax because the abatement subsidy increases (decreases) with the tax, and pollution increases (decreases) in the abatement subsidy. This occurs because the lobbying incentives change at a pollution tax reform. Second, pollution taxes may reduce net revenues because subsidy expenditures rise. Third, pollution may increase simultaneously as net revenues fall. Finally, the welfare effect of a pollution tax may be negative.     

The Fallout to the Guide to the Proposed Basin Plan

The political fallout from the release of the Guide to the Proposed Basin Plan in the Murray‐Darling is illustrative of the difficulties associated with reallocating water resources in this context. The response of Minister Burke has been somewhat predictable, with a resurgent interest in public subsidy of irrigation infrastructure evident. This article is used to examine the policy background to the Guide and critically consider further subsidy of irrigation infrastructure. The article concludes that infrastructure investment at the expense of the public purse will fail to deal with the problems at hand and generate a plethora of additional future problems.     

Hold your nose and vote: corruption and public decisions in a representative democracy

This paper analyzes how corruption alters policy decisions in democracy, and examines whether this distortion can result in a long-term persistence of corruption even when the voters are well informed and rational. By applying a citizen-candidate model of representative democracy, the paper analyzes how corruption distorts the allocation of resources between public and private consumption, altering the policy preferences of elected and nonelected citizens in opposite directions. The outcome is a reduction in real public expenditure and, if the median voter??s demand for public goods is sufficiently elastic, a reduction in taxes. In this case, some citizens benefit indirectly from corruption. The paper also presents some empirical evidence that, in democratic countries, corruption results in lower tax revenue, and proceeds to show that, when this occurs, citizens anticipating a shift in preferences in favor of public expenditure may support institutions that favor corruption. This result complements the findings of other studies that have attributed the persistence of corruption in democracy to some failure on the part of the voters or the electoral system. It also bears implications for developing effective anticorruption strategies and for redefining the role that can be played by the international community.     

The Political Economy of Tax Coordination as a Bargaining Game Between Bureaucrats and Politicians

In the public finance literature, the view prevails that taxcompetition among countries gives rise to an underprovision ofpublic goods and that coordinated tax increases are thereforedesirable. Public choice arguments, in contrast, suggest thattax coordination may not be in the interest of thetaxpayers/citizens because imperfections of the politicalprocess (political distortions) may lead to a waste of taxmoney. According to this view, tax competition is a desirablecheck on the power to tax whereas tax coordination would onlyrelax the budget constraint of an inefficient public sector.The present paper integrates the underprovision argument andthe public choice view into a common theoretical framework.The government is assumed to consist of politicians andbureaucrats with diverging interests. Fiscal policy ismodelled as the outcome of a bargaining game between thebureaucrats and the politicians. It turns out that coordinatedtax increases always raise the provision of public goods butalso increase the cost of political distortions. The effect onthe welfare of the representative citizen may be positive ofnegative, depending in particular on the distribution ofbargaining power between bureaucrats and politicians.     

Policy attribute framing: A comparison between three policy instruments for personal emissions reduction

A comparative experiment in the UK examined people's willingness to change energy consumption behavior under three different policy framings: energy tax, carbon tax, and personal carbon allowances (PCA). PCA is a downstream cap‐and‐trade policy proposed in the UK, in which emission rights are allocated to individuals. We hypothesized that due to economic, pro‐environmental and mental accounting drivers PCA would have greater potential to deliver emissions reduction than taxation. Participants (n = 1,096) received one version of a survey with the same energy‐behavior–related questions and identical incurred costs under one of the following framings: energy tax (where carbon was not mentioned), carbon tax, and PCA. Results suggest that policies that draw people's attention to carbon (PCA and carbon taxation) could have greater impact on their stated willingness to reduce energy consumption, and on the reduction amounts prompted, than would a non‐overt price signal (energy tax). There is mixed evidence, however, as to whether PCA or carbon taxation would produce the largest energy demand reductions. Some indication was found for a spillover toward wider carbon conservation under the PCA framing. © 2011 by the Association for Public Policy Analysis and Management.     

The tax-welfare mix: explaining Japan's weak extractive capacity

Abstract

Despite having the highest level of public debt in the Organisation for Economic Co-operation and Development (OECD), higher than Greece or Italy, Japan has one of the lowest aggregate tax burdens of the advanced industrial democracies. This paper asks why Japan, once described as a strong developmental state, has had such a weak extractive capacity, an inability to raise revenues to confront deficits and public debt? In contrast to the existing explanations that focus on political institutions, partisan preferences, or economic globalization, this article argues that Japan's ‘tax–welfare mix’ – the combination of taxes and redistributive welfare polices – undermined the state's long-term capacity to secure adequate tax revenue. More than just a source of revenue, taxes can be used directly to achieve redistributive goals, such as targeting low taxes and exemptions to specific groups. This study shows how Japan's tax–welfare mix diminished its extractive capacity through three mechanisms: the political lock-in of a redistributive social bargain struck around low taxes, the timing and sequencing of its tax policy and welfare development, and the erosion of public trust, which undermined tax consent. Beyond offering a new theory of extractive capacity, the tax–welfare mix explains aspects of Japan's tax structure that defy existing explanations and contributes to our understanding of the capitalist development state by highlighting the redistributive political function of tax policy and its long-term impact on state capacity.     

Easy Money: Tax Exporting and State Support for Higher Education

There is a substantial literature that assesses the effects of tax‐exporting capacities on the tax structures and aggregate spending levels that state governments choose to implement, but no work exists that isolates the effects of state tax exporting on higher education spending. Using state‐level data for 1989, 1995, 2002, and 2007, we estimate for the median voter in each state the change in the marginal cost of higher education subsidization generated by tax exportation, and calculate the increased higher education spending that results. We consider three types of spending: state appropriations to public universities as well as need‐ and non‐need‐based aid awarded to in‐state students. We find that neither type of aid is responsive to the marginal cost, or tax price, faced by the median voter. However, the median voter's price elasticity of demand for state appropriations is statistically significant and negative. We find that the median voter's tax price is substantially reduced by the presence of prominent mining and tourism industries and by the federal deductibility offset available to firms. Thus, these tax‐exporting capacities exert upward pressure on voter demand for state appropriations to public universities.     

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.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.     

Who Benefits from Targeted Property Tax Relief? Evidence from Virginia Elections

This study examines the market impact of targeted property tax relief, which is critical for understanding who exactly benefits from a widely used local policy. Specifically, we investigate this in the context of two statewide ballot measures in Virginia that provided property tax relief or heightened expectations for future relief intended to aid disabled veterans and seniors, respectively. Using residential multiple listing service microdata from Virginia, results from a regression discontinuity analysis show that once the 2010 tax relief measures passed on Election Day, property values rose sharply in response to the sudden increase in demand for homeownership among the targeted groups. We find that senior preferred housing and properties within areas with higher proportions of seniors and veterans experienced the highest price appreciation, while areas with fewer veterans or seniors saw little impact. The findings suggest that this type of policy provides an immediate benefit to current homeowners, thereby offsetting benefits for subsequent homeowners within the targeted groups. This effect represents an unintended consequence of targeted property tax relief as a policy tool more generally, as immediate capitalization into home prices subsequently increases the cost of housing for many individuals the relief was intended to help.     

Fiscal Policy,Deficits and Politics of Subnational Governments: The Case of the German Laender

The first part of the paper briefly describesinstitutional aspects of the German federal system andexamines the economic and fiscal performance of theGerman Laender since 1970. Taking into account theinstitutional settings, especially the fact that theGerman Laender cannot set tax rates individually, wedevelop a highly stylized model of subnationalgovernments that do not have access to the tax rateinstrument and thus have to use expenditures as apolicy variable. The model implies an expendituresmoothing policy of subnational governments andcomplements the famous tax smoothing model. Theempirical section examines whether governments ofvarious ideology show significant differences infiscal stabilization policy. Our results indicatethat regional differences in public debt accumulationand public expenditure policy in general is largelydetermined by interregional differences in economicperformance, whereas we do not find any significantimpact on the ideological composition of the Laendergovernments.     

Implementing Fiscal Decentralization: A Case Study of a Regional Tax Agency in Italy

As a measure to enhance the fiscal autonomy of the region, in 2006 the Regional Government of Sardinia in Italy decided to establish a tax agency for managing regional taxes on holiday houses and boat and aircraft transit. Based on interviews conducted with the tax agency director and staff, this article traces the trajectory and outcome of events included in the implementation of this part of the regional government's fiscal policy. Drawing from this case, this article theorizes the process of implementing fiscal decentralization by addressing the issue of how fiscal policy decisions affect the management of tax agencies in the start‐up stage. Social mechanisms of learning, brokerage, and actor certification provide important linkages between fiscal policy choices and organizational change. On the whole, the research argument made in this article further contributes to institutionalist and processualist research trends in current research on organization studies and public management.