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(共23张PPT)
PERSONAL TAXATION AND BEHAVIOR
Chapter 18
Labor Supply
Hours of leisure per week
Income per week
0
T
time endowment
D
|Slope| = w
F
G
Leisure
Work
i
ii
iii
E1
Income
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Effects of Taxation
Hours of leisure per week
Income per week
0
T
D
|Slope| = w
F
G
ii
iii
E1
i
I
E2
|Slope| = (1-t)w
H
G’
Hours of work before tax
Hours of work after tax
18-*
Effects of Taxation
Hours of leisure per week
Income per week
0
T
D
F
G
ii
iii
E1
i
J
E3
H
K
Hours of work before tax
Hours of work after tax
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Effects of Taxation
Hours of leisure per week
Income per week
0
T
D
F
N
E1
P
E4
Hours of work before tax
|Slope| = w
|Slope| = (1-t1)w
|Slope| = (1-t2)w
|Slope| = (1-t2)w
(1-t1)$5,000
(1-t1)$5,000 + (1-t2$5,000
18-*
Empirical Findings
Eissa [2001]
For males aged 20-60, the effect of changes in the net wage on hours worked is small and often statistically insignificant
Elasticity of approximately 0.05
For married females, the hours of work and labor force participation decisions are quite sensitive to changes in the net wage, although it has gotten smaller over time.
Elasticity of approximately 0.40
18-*
Some Caveats
Demand-side considerations
Individual versus group effects
Other dimensions of labor supply: Human Capital
The compensation package
The expenditure side
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Taxes and Human Capital Accumulation
Human capital
Investing in human capital
B – C > 0
(1 – t)B – (1 – t)C = (1 – t)(B – C>) 0
Income versus substitution effects
Shortcomings of model
Returns uncertain
Explicit costs
Other taxes
Progressive taxes
18-*
Labor Supply and Tax Revenues
Hours per week
Wage rate per hour
SL
w
L0
(1-t1)w
L1
d
b
a
c
(1-t2)w
e
f
L2
k
(1-t3)w
h
i
L3
j
(1-tA)w
LA
18-*
Tax Rates versus Tax Revenue–
Laffer Curve
Tax rate
Tax revenue
t1
t2
tA
t3
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Debate Over the Laffer Curve
The Laffer curve and the elasticity of labor supply
Where on the Laffer curve is the economy operating
Other ways tax rates can affect tax revenues
Determining the optimal tax rate
Is maximizing tax revenue a valid goal
18-*
Saving and the Life-Cycle Model
Present consumption (c0)
Future consumption c1
Endowment point
I0
I1
M
N
Slope = 1 + r
E1
c0*
c1*
i
ii
iii
Saving
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Deductible Interest Payments and Taxable Interest Receipts
Present consumption (c0)
Future consumption c1
I0
I1
M
N
After-tax budget line Slope = 1 + (1-t)r
E1
c0*
c1*
Saving before tax
Q
P
A
c0t
c1t
Saving after tax
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Deductible Interest Payments and Taxable Interest Receipts
Present consumption (c0)
Future consumption c1
I0
I1
M
N
After-tax budget line Slope = 1 + (1-t)r
E1
c0*
c1*
Saving before tax
Q
P
A
c0t
c1t
Saving after tax
18-*
Nondeductible Interest Payments and Taxable Interest Receipts
Present consumption (c0)
Future consumption c1
I0
I1
M
N
After-tax budget line Slope = 1 + (1-t)r
c1*
Q
P
A
c1t
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Some Additional Considerations
Real net rate of return
Many assets
Private saving versus social saving
Validity of life-cycle model
Empirical evidence: effect of taxation on saving
Problems using the regression approach
Specification issues
Measurement issues
Joint Committee on Taxation [2005]
18-*
Tax-Preferred Savings Accounts
Types of tax-preferred savings accounts and how they work
Are contributions to these accounts new saving
Administrative details and effect on saving: insights from Behavioral Economics
18-*
Taxes and the Capital Shortage
Taxes and investment
Taxes and excess burden
Closed versus open economy
18-*
Housing Decisions
Effects of the income tax on housing decisions
Rnet = R – I + ΔV
Implicit rent not taxed
Deductibility of mortgage interest and property tax payments
The decision to rent or buy
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Proposals for Change
Critique of subsidy for owner-occupied housing
Are there significant positive externalities
Impact on distribution of income
Incentive to take on risky mortgages, contributing to the housing and financial crisis of 2008-2009
Political feasibility of taxing imputed rent
Reform proposals
Elimination of deduction for property tax and mortgage interest
Placing an upper-limit on deductions
Convert mortgage interest deduction into a credit
18-*
Portfolio Composition
Tobin’s model of portfolio composition
Impact of proportional tax with full loss offset
Impact on return
Impact on risk
Empirical evidence
18-*
A Note on Politics and Elasticities
Ambiguity about effect of taxation on behavior
Importance of elasticities
“Convenient” beliefs about elasticities
18-*
Chapter 18 Summary
The U.S. personal income tax affects several economic decisions including labor supply, housing consumption, saving, and human capital investment
Research into these affects are among the most contentious of all areas of public policies
18-*

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