Category Archives: Taxation

3 Ways Governors Can Strengthen States’ Long-Term Fiscal and Economic Health

Source: Pew Charitable Trusts, July 23, 2015

At the National Governors Association’s Summer Meeting this week in West Virginia, leaders from around the country will collaborate across party lines to develop best practices that improve state government. Important lessons can be learned from governors who enacted policies this year to strengthen their states’ long-term fiscal and economic health. These initiatives reflect a growing demand for state policy decisions to be rooted in the best available data and evidence.

Here are three steps governors and state legislators have taken this year to shore up their states’ long-term fiscal health:
1. Tax incentive evaluation ….
2. Rainy day fund reform ….
3. Evidence-based policymaking ….

Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity

Source: Joseph E. Stiglitz, Nell Abernathy, Adam Hersh, Susan Holmberg, Mike Konczal, Roosevelt Institute, 2015

From the abstract:
In this new report, the Roosevelt Institute exposes the link between the rapidly rising fortunes of America’s wealthiest citizens and increasing economic insecurity for everyone else. The conclusion is clear: piecemeal policy change will not do. To improve economic performance and create shared prosperity, we must rewrite the rules of our economy.
Related:
Executive Summary
Policy Agenda
Speakers
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skyrocketing CEO pay

increasing the tax at the top 5%

Shaming Tax Delinquents: Theory and Evidence from a Field Experiment in the United States

Source: Ricardo Perez-Truglia, Ugo Troiano, National Bureau of Economic Research (NBER), NBER Working Paper No. w21264, June 2015
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From the abstract:
We study shaming as a policy to improve tax debt collection. First, we show that when the tax agency focuses on private welfare and revenues, the optimal policy may involve a mix of financial and shaming penalties. Second, we present evidence from a field experiment with 34,344 tax delinquents who owed half a billion dollars in three U.S. states. We find that increasing the salience of financial and shaming penalties reduces tax delinquency. We also provide suggestive evidence that the effectiveness of these penalties depends on the garnishability of the debtor’s income as in the model.

The Equity of Local Sales Tax Distributions in Urban, Suburban, Rural, and Tourism Rich Counties in North Carolina

Source: Whitney Afonso, Public Finance Review, Published online before print June 26, 2015
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From the abstract:
The use of local options sales taxes (LOSTs) is creating largely unexplored equity concerns with regard to the revenue raising capabilities of different local governments. This article focuses on differences among urban, suburban, and rural counties; the impact of proximity to urban (or retail) centers; and the impact of LOST decisions on tourism rich counties, a new category of local governments. Using data from 2003 to 2009 on all 100 North Carolina counties and a spatial Durbin error panel model, I identify factors relating to LOST revenue raising capacity (RRC). The results indicate that tourism rich counties have the greatest LOST capacity, suburban counties have the least, and there is a penalty for bordering an urban county. However, statistically significant differences in the RRC of the four types of counties disappear once property taxes are included in the mix.

Effective Policy for Reducing Inequality? The Earned Income Tax Credit and the Distribution of Income

Source: Hilary W. Hoynes, Ankur J. Patel, National Bureau of Economic Research (NBER), NBER Working Paper No. 21340, July 2015
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In this paper, we examine the effect of the EITC on the employment and income of single mothers with children. We provide the first comprehensive estimates of this central safety net policy on the full distribution of after-tax and transfer income. We use a quasi-experiment approach, using variation in generosity due to policy expansions across tax years and family sizes. Our results show that a policy-induced $1000 increase in the EITC leads to a 7.3 percentage point increase in employment and a 9.4 percentage point reduction in the share of families with after-tax and transfer income below 100% poverty. Event study estimates show no evidence of differential pre-trends, providing strong evidence in support of our research design. We find that the income increasing effects of the EITC are concentrated between 75% and 150% of income-to-poverty with little effect at the lowest income levels (50% poverty and below) and at levels of 250% of poverty and higher. By capturing the indirect effects of the credit on earnings, our results show that static calculations of the anti-poverty effects of the EITC (such as those released based on the Supplemental Poverty Measure, Short 2014) may be underestimated by as much as 50 percent.

State Sales Taxes 2015

Source: Jennifer Burnett, Council of State Governments, Capitol Research, June 2015

Forty-five states levy a general statewide sales tax, with rates ranging from 2.9 to 7.5 cents per $1 as of Jan. 1, 2015. Over the past decade, sales tax rates have remained relatively stable, with few states making significant changes. ….
Related:
Download the Excel Version of the Table: “State Sales Taxes

Causes and Consequences of Income Inequality: A Global Perspective

Source: Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, Evridiki Tsounta, International Monetary Fund (IMF), IMF Staff Discussion Note SDN/15/13, June 15, 2015

From the summary:
This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive