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To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-8462.2007.00459.x Byline: Guyonne Kalb (1) Author Affiliation: (1)Melbourne Institute of Applied Economic and Social Research, The University of Melbourne Article History: April 2007

Methods employed in the evaluation of the impact of tax changes on welfare are examined in detail.

The modeling of the intergenerational redistributive policies of politicians show that such a policy can result in multiple polical equilibria that tends to place political gains before social welfare. The adoption of a redistributive policy at any time in the elected officials career is bound to marginalize either the young or old generation of constituents, and has the added disadvantage of dissipating economic output via low consumption.

Theory: We propose a theory of corporate taxation in the United States that builds on dynamic optimal taxation models. The theory is consistent with structural dependence theories (Lindblom 1977) in that expectations by investors of future tax policy limit policy maker options, primarily because corporate tax policy is time inconsistent. This theory contrasts with pluralistic models of corporate taxation because it recognizes the collective action problem facing business. Hypotheses: We offer three propositions. First, effective corporate tax rates will be exogenous to aggregate business interests, and instead should cause the organization and activity of business. Second, a shock in effective tax rates will reduce relative levels of investment. Third, effective corporate tax rates will be exogenous to real income and real investment. Methods: Exogeneity tests and the moving average representation from several vector autoregressions are used to evaluate the propositions. Results: All three propositions are supported. Dynamics in the effective corporate tax policy are consistent with an optimal model of taxation, at least for the period 1977-94.

The Jerome Levy Economic Institute at Bard College presented a program arranged by Professor Kris Feder on 'Land Wealth and Poverty,' on November 2-4, 1995. Two of the talks presented are here reproduced with more to follow in subsequent issues of this Journal. J. Ted Gwartney, former senior appraisal officer of the Bank of America presented the view that a 4% tax on the value of land, as broadly defined, could provide revenue adequate for the removal of all other taxes. Professor Nicolaus Tideman argued the case of morality of taxation at the local level.

Time inconsistency of tax policy is shown to arise in a setting where households differ in their ability to accumulate wealth and where the government has redistributional objectives. It is assumed that wealth accumulation takes the form of human capital acquired through education. The government is precluded from redistributing to a first-best optimum by a self-selection constraint. The second-best is shown to be time-inconsistent. In the time-consistent optimum, households underinvest in education. An argument can be made for public intervention in the provision of education.

The justice and soundness of the taxation of land rent is acknowledged but problems in assessing imply a need to introduce better methods. This is particularly true when attempting to introduce the more saleable idea of two-rate tax systems because the allocation of total value of real estate parcels between land and buildings is even more arbitrarily done than determining the total assessment. The ideas fit best at the local level and there is little chance of replacing income or sales taxes. A 100% tax would be impossible since it would lead to an avalanche of tax appeals and the abandonment of some land since a high percentage of assessments are in error. The idea of a single tax does not fit modern times when revenue needs determine taxes, rather than the amount of revenue collected determining proper or necessary government expenditure levels. One tax source may be unpopular and regarded as a dangerous concept. Land is probably less important and less relatively valuable than it used to be because of technological change. Some advances in social legislation may mitigate the need for the drastic reform, George who was a moralist deeply concerned about poverty, felt reform was needed in his day. He was right about the impacts of various taxes on economic activity and income distribution.

A comparison of taxpayer compliance in Spain and the US reveals that social factors may be as important as economic factors such as a person's overall tax burden in affecting compliance rates. Taxing bodies may be able to increase compliance by showing taxpayers that their money is well spent and invoking moral arguments for compliance that make taxation seem like a citizen's duty to society. Detection and punishment of non-compliers still provide a good deterrence strategy, however.

Changes in taxation policy may have different effects on various tax-paying sectors such as individuals, families or households. Although policies may be constructed for one sector, these may cause interdependent effects in other taxpaying groups. For instance, a policy targeted to benefit well off individuals may be disadvantageous to a poorer family. Thus evaluations of the socio-economic impact of tax reforms must be done by observing the effects of changes among the different sectors.

Annual net fiscal incidence studies have generally been used to show that income redistribution through government taxes and expenditures is progressive as their net effect is the transfer of income from rich to poor. An analysis of lifetime taxation and expenditures shows that such studies have overstated the income redistribution effect. On the other hand, the premise that the lifetime redistribution is purely intra-personal rather than inter-personal redistribution is not supported. The tax-transfer system is progressive and results in some inter-personal distribution.

The equity of taxes on casino gambling in Las Vegas and Atlantic City using recent survey data is examined. Daniel B. Suits' (1977) study of the tax on casino gambling concluded that the tax was progressive when he used a national sample to estimate tax incidence. This result is challenged. Tax incidence is estimated using survey data obtained from people who either live in or have traveled to Las Vegas or Atlantic City. On the basis of the sample of people who have given themselves access to casino gambling, the tax is regressive; in fact, it is extremely regressive in Las Vegas. Therefore, in this time of easier access to casino gambling, policy-makers should be aware that the taxes on casino gambling place a proportionately heavier burden on low income groups.

Recent research into the impact of Anglo-Scottish conflict on northern England's economy has become increasingly sophisticated, using local estate accounts to enhance understanding of the role of war in the 'crisis' of the early fourteenth century. Yet taxation data also remains an important source on these issues, not least because of its wide geographical coverage. Using a rich series of lay subsidy documents for Cumberland, this article concludes that the direct impact of Scottish raids was only one of several determinants of economic fortunes. More significantly, reconstructing the process of taxation shows that non-violent resistance to state levies was as responsible as war damage for a decline in revenue from the county.

This paper examines the unemployment and wage effects of the tax shift from an income tax to a consumption tax in a shirking-type efficiency wage model. It is found that the results of the ex-ante individual income-neutral and aggregate revenue-neutral proposals in this paper's efficiency wage model confirm those in the monopoly trade union model analyzed by Sampson (1986), Creedy and McDonald (1990, 1992), and Pemberton (1992). The ex-post tax-shifting schemes are also discussed.