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The Theory of Taxation and Public Economicspresents a unified conceptual framework for analyzing taxation--the first to be systematically developed in several decades. An original treatment of the subject rather than a textbook synthesis, the book contains new analysis that generates novel results, including some that overturn long-standing conventional wisdom. This fresh approach should change thinking, research, and teaching for decades to come. Building on the work of James Mirrlees, Anthony Atkinson and Joseph Stiglitz, and subsequent researchers, and in the spirit of classics by A. C. Pigou, William Vickrey, and Richard Musgrave, this book steps back from particular lines of inquiry to consider the field as a whole, including the relationships among different fiscal instruments. Louis Kaplow puts forward a framework that makes it possible to rigorously examine both distributive and distortionary effects of particular policies despite their complex interactions with others. To do so, various reforms--ranging from commodity or estate and gift taxation to regulation and public goods provision--are combined with a distributively offsetting adjustment to the income tax. The resulting distribution-neutral reform package holds much constant while leaving in play the distinctive effects of the policy instrument under consideration. By applying this common methodology to disparate subjects,The Theory of Taxation and Public Economicsproduces significant cross-fertilization and yields solutions to previously intractable problems.

Optimal tax design attempts to resolve a well-known trade-off: namely, that high taxes are bad insofar as they discourage people from working, but good to the degree that, by redistributing wealth, they help insure people against productivity shocks. Until recently, however, economic research on this question either ignored people's uncertainty about their future productivities or imposed strong and unrealistic functional form restrictions on taxes. In response to these problems, the new dynamic public finance was developed to study the design of optimal taxes given only minimal restrictions on the set of possible tax instruments, and on the nature of shocks affecting people in the economy. In this book, Narayana Kocherlakota surveys and discusses this exciting new approach to public finance. An important book for advanced PhD courses in public finance and macroeconomics,The New Dynamic Public Financeprovides a formal connection between the problem of dynamic optimal taxation and dynamic principal-agent contracting theory. This connection means that the properties of solutions to principal-agent problems can be used to determine the properties of optimal tax systems. The book shows that such optimal tax systems necessarily involve asset income taxes, which may depend in sophisticated ways on current and past labor incomes. It also addresses the implications of this new approach for qualitative properties of optimal monetary policy, optimal government debt policy, and optimal bequest taxes. In addition, the book describes computational methods for approximate calculation of optimal taxes, and discusses possible paths for future research.

The interrelations between indeterminacy and progressive income tax rules are discussed in a one-sector real business cycle model with capacity utilization, productive increasing returns, and the Jaimovich-Rebelo preferences that exhibit varying degrees of income effect. When the values of income effect are large and the other parameter values are plausible, a moderately progressive income tax schedule can destabilize the economy by generating local indeterminacy. Moreover, numerical examples show that when an income tax schedule with a progressivity feature destabilizes the economy, the degree of income effect and the minimum level of increasing returns required for local indeterminacy are negatively related. These results are in contrast to those obtained in Guo and Lansing (1998), in which a progressive tax schedule can stabilize the one-sector economy with increasing returns.

Productivity externalities create room for Keynesian-type stabilization to insulate the economy from belief-driven fluctuations. Conventional wisdom indicates that in a Benhabib-Farmer-Guo one-sector model, a progressive tax schedule operates like an automatic stabilizer that mitigates business cycle fluctuations, but in an indeterminate two-sector real business cycle model a regressive, rather than a progressive, tax policy stabilizes the economy against sunspot-driven fluctuations. This paper proposes an alternative policy — an income tax-cum-consumption tax schedule — to stabilize the economy against sunspot fluctuations. We show numerically that the government can suppress belief-driven fluctuations by implementing a tax switch decreasing the income tax and increasing the consumption tax. This result is robust not only in a two-sector model with sector-specific externalities, but also in a one-sector model with aggregate productivity externalities.

At the 75th session of the United Nations General Assembly (UNGA) in 2020, China put forward the goal of peaking carbon dioxide emissions by 2030 and achieving carbon neutrality by 2060, a move to lead global response to climate change that has attracted wide attention and hot comments at home and abroad. Therefore, it is of great practical significance and academic value to explore ways of achieving carbon peaking ahead of schedule and study the macroeconomic effect. This paper, based on Energy, Environment and Economy recursive dynamic computable general equilibrium model (TECGE), a dynamic computable general equilibrium model, carries out a quantitative analysis of the effect of strengthening carbon peaking commitment on China’s future macro economy. By setting up four scenarios, namely carbon peaking of 10.8 billion tons, 10.7 billion tons, 10.58 billion tons and 10.36 billion tons in 2030, 2027, 2025, and 2023, it examines the effects of carbon peaking ahead of schedule and carbon peaking in 2030 on macro economy. The findings show that, compared with the 2030 benchmark, the more ahead of schedule carbon peaking is achieved, the higher the carbon tax prices, and that though GDP and other macroeconomic variables, such as aggregate consumption, aggregate imports and exports decline, the share of the tertiary industry increases. That is, the more ahead of schedule carbon peaking is achieved, the more macroeconomic variables decline, and the more the share of the tertiary industry rises. This paper, using computable general equilibrium (CGE) model to conduct a quantitative analysis of the macroeconomic effect, makes policy recommendations for carbon peaking ahead of schedule and high-quality economic development.

This paper considers a government thatseeks both to redistribute income and to encourage or discouragethe consumption of a certain good. This good is assumed to beeither a merit or demerit good. Individuals differ in their exogenousincome and in their preferences for the merit good. The onlyvariable the government can perfectly observe is each individual'sconsumption of the merit good. In order to account for meritgood considerations, we consider a modification of the utilitariansocial welfare function in which the government imposes uniformpreferences, despite the heterogeneous individual preferences,at a level which will depend on the merit or demerit nature ofthe observable good. We derive the optimal nonlinear redistributivepolicy and compare our results to the ones that would be obtainedunder a utilitarian social welfare function that respects theown preferences of individuals. Copyright Kluwer Academic Publishers 2000

This chapter focuses on income tax. Compliance with Laws and Regulations, tax schedules are prepared that represent the company's jurisdictional obligations for income tax preparation and filing. The tax department can demonstrate adherence to the schedule. Tax research is documented, identifying company‐specific procedures to implement tax requirements into operational and tax processes. There are established lines of communication between the tax function and the functional and geographic business units, providing clear instruction as to required input for income tax preparation. The tax management compares the forecasted pretax income with the tax provision work papers. The tax provision calculation is properly documented, accurately determined, supported, and recorded in the general ledger.

This paper analyzes particular areas of tax policy that have concerned the Colombian authorities during the 1990s, while comprising a comprehensive approach to tax reform over time. It is intended to allow the reader to view in technical detail the type of analysis conducted in a representative tax reform study carried out by the IMF

This study exploits the implementation of IRS Schedule UTP to examine how linking tax return disclosures to financial reporting for income taxes affects firms' reporting decisions. Using confidential tax return data and public financial statement data, I find that after imposition of Schedule UTP reporting requirements, firms report lower financial reporting reserves for uncertain income tax positions, but do not claim fewer income tax benefits on their federal tax returns. The reduction in reserves is concentrated among multinational firms and firms with larger reserves prior to Schedule UTP. These findings suggest that some firms changed their financial reporting for uncertain tax positions to avoid Schedule UTP reporting requirements without changing the underlying positions. In contrast with prior studies, this evidence represents a permanent, rather than a temporary, tax-induced reporting change. My results imply that linking tax return disclosures to financial reporting can have unintended effects on firms' reporting decisions.