Abstract

http://ssrn.com/abstract=1739691
 
 

References (41)



 
 

Citations (3)



 


 



Fair and Efficient Taxation under Partial Control: Theory and Evidence


Erwin Ooghe


Catholic University of Leuven (KUL) - Center for Economic Studies

Andreas Peichl


Centre for European Economic Research (ZEW); University of Mannheim - School of Economics (VWL); Institute for the Study of Labor (IZA); University of Essex - Institute for Social and Economic Research (ISER)

December 1, 2010


Abstract:     
There is clear evidence that fairness plays a role in redistribution. Individuals want to compensate others for their misfortune, while they allow them to enjoy the fruits of their effort. Such fairness considerations have been introduced in political economy and optimal income tax models with a focus on income acquisition. However, actual tax-benefit systems are based on much more information. We introduce fairness in a tax-benefit scheme that is based on several characteristics. The novelty is the introduction of partial control. Each characteristic differs in terms of the degree of control, i.e., the extent to which it can be changed by exerting effort. Two testable predictions result. First, the tax rate on partially controllable characteristics should be lower compared to the tax rate on non- controllable tags. Second, the total effect of non-controllable characteristics on the post-tax outcome should be equal to zero. We estimate implicit tax rates for different characteristics in 26 European countries (using tEU-SILC data) and the US (using CPS data). We find a robust tendency in all countries to compensate more for the uncontrollable composite characteristic (based on sex, age and disability in our study) compared to the partially controllable one (based on family composition, immigration status, unemployment and education level). We also estimate the degree of fairness of tax-benefit schemes in different countries. Only the Continental countries France and Luxembourg pass the fairness test, whereas the Baltic and Anglo-Saxon countries (including the US) perform worst.

Number of Pages in PDF File: 46

Keywords: fairness, redistribution, tax-benefit schemes, tagging, optimal taxation

JEL Classification: D6, H2, I3

working papers series


Download This Paper

Date posted: January 18, 2011  

Suggested Citation

Ooghe, Erwin and Peichl, Andreas, Fair and Efficient Taxation under Partial Control: Theory and Evidence (December 1, 2010). Available at SSRN: http://ssrn.com/abstract=1739691 or http://dx.doi.org/10.2139/ssrn.1739691

Contact Information

Erwin Ooghe (Contact Author)
Catholic University of Leuven (KUL) - Center for Economic Studies ( email )
Naamsestraat 69
Leuven, B-3000
Belgium
Andreas Peichl
Centre for European Economic Research (ZEW) ( email )
P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany
University of Mannheim - School of Economics (VWL) ( email )
Mannheim 68131
Germany
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
University of Essex - Institute for Social and Economic Research (ISER)
Wivenhoe Park
Colchester CO4 3SQ
United Kingdom
Feedback to SSRN


Paper statistics
Abstract Views: 133
Downloads: 15
References:  41
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.266 seconds