O trabalho utiliza conceitos da economia do bem estar e a elasticidade da renda tributável para analisar o custo social das reações comportamentais dos contribuintes do imposto de renda sobre as pessoas físicas no Brasil, em resposta a uma mudança de política tributária. A elasticidade da renda tributável despertou grande atenção recente, motivada pela perspectiva de estimar em conjunto todas as reações comportamentais a uma mudança no sistema tributário através de um único parâmetro, mensurando custos de eficiência e de bem estar suportados pela economia de forma relativamente simples. O trabalho aborda a utilização de medidas de variação de bem estar para avaliar mudanças na política tributária e faz uma resenha da literatura sobre a elasticidade da renda tributável, conceitos, características, vantagens e limitações. Um modelo de preferências é especificado para exemplificar a dimensão das reações à tributação e os custos de eficiência envolvidos, e discutir a viabilidade do emprego da elasticidade da renda tributável como parâmetro estrutural.; This study aims to analyse the social cost and behavioural responses due the taxation of earned income in Brazil using welfare concepts and the elasticity of taxable income with respect to the net of tax rate. The elasticity of taxable income has deserved great attemption and is a main issue in public economics research agenda. Under some conditions...

This paper uses a Treasury Department panel of more than 4,000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates based on a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform. The analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply. The evidence shows an elasticity of taxable income with respect to the marginal net-of-tax rate that is at least one and that could be substantially higher. The implications for recent tax rate changes are discussed.; Economics

This paper uses firm-level survey data matched with official tax records to estimate the unobserved true sales of formal firms in Mongolia. Taking into account firm-level incentives to comply with taxes and a production function technology linking unobserved true sales with observable firm-level production characteristics, the authors derive a multiple-indicators, multiple-causes model predicting unobserved true sales. Comparing predicted true sales with sales reported to the tax office, the analysis finds that 38.6 percent of firm-level sales are underreported. It also finds evidence that firm-level survey data suffer from significant underreporting. Finally, the paper compares this approach with two alternative approaches to measuring underreporting by firms.

The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor -- through income effects. However, the consensus is wrong because the income effects of taxes must be considered symmetrically with those from provision of public goods. This paper uses a model with multiple public goods and taxes to derive consistent measures of the marginal benefits of publicly-provided goods and their marginal social costs. With this model, the authors show that either compensated approaches excluding these income effects or uncompensated approaches including them may be used. If an uncompensated measure of the marginal cost of funds is used, however, the benefits of providing public goods should be adjusted with a simple, benefit multiplier not previously seen in the literature. Once this is done...

Who benefits from public spending? Who bears the burden of taxation? How desirable is the distribution of net benefits from the operation of a tax-benefit system? This paper surveys basic concepts, methods, and modeling approaches commonly used to address these issues in the context of fiscal incidence analysis. The review covers the incidence of both taxation and public spending. Methodological points are supported by country cases. The effective distribution of benefits and burdens associated with fiscal policy depends on the size of the government, the distributive mechanisms involved, and the incentives properties of the policy under consideration. This creates a need for analytical methods to account for both individual behavior and social interaction. The approaches reviewed include simple reduced form regression analysis, microsimulation models (both the envelope and discrete choice models), computable general equilibrium modeling, and approaches that link computable general equilibrium models to microsimulation models. Explicit modeling facilitates the construction of counterfactuals to back up causal analysis. Social desirability is assessed on the basis of progressivity along with deadweight loss.

The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. The authors confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation-and will provide the same result-as long as the income effects of both taxes and public good provision are incorporated in a consistent manner.

This article presents data on the evolution of top incomes and wages for 1922-2000 in India using individual tax return data. The data show that the shares of the top 0.01 percent, 0.1 percent, and 1 percent in total income shrank substantially from the 1950s to the early to mid-1980s but then rose again, so that today these shares are only slightly below what they were in the 1920s and 1930s. This U-shaped pattern is broadly consistent with the evolution of economic policy in India: from the 1950s to the early to mid-1980s was a period of 'socialist' policies in India, whereas the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift toward more pro-business policies. Although the initial share of the top income group was small, the fact that the rich were getting richer had a nontrivial impact on the overall income distribution. Although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in National Sample Survey based data and the national accounts based data...

Assume that a public program -- whether in the form of public expenditures or regulation of private activities -- provides not only a public good to consumers but also a collective input (say, a less polluted water source for brewers, or better roads for their trucks). In a context of optimal taxation and constant returns to scale, the author shows that only the direct benefits to consumers in the form of a public good are adjusted by the shadow price of public revenue (typically downward, as Pigou conjectured) before benefits are aggregated to establish optimal provision. When public programs benefit productive sectors through cost savings, the marginal cost of provision is in optimum equal to the marginal cost savings in the benefiting sectors. The reason that programs that benefit production are not scaled down by the shadow price of public revenue is that the benefits are derived from markets that are otherwise taxable. Government can capture those cost savings at no distortionary cost by increasing the tax rates for each good...

Many Central and Eastern European countries are adopting flat tax schemes in order to boost their economies and tax revenues. Though there are signs that some countries do manage to improve on both fronts, it is in general hard to distinguish the behavioral response to tax changes from the effect of increased tax enforcement. This paper addresses this gap by estimating the elasticity of taxable income in Hungary, one of the outliers in terms of not having a flat tax scheme. We analyze taxpayer behavior using a medium-scale tax reform episode in 2005, which changed marginal and average tax rates but kept enforcement constant. We employ a Tax and Financial Control Office (APEH) panel dataset between 2004 and 2005 with roughly 215,000 taxpayers. Our results suggest a relatively small but highly significant tax price elasticity of about 0.06 for the population earning above the minimum wage (around 70% of all taxpayers). This number increases to around 0.3 when we focus on the upper 20% of the income distribution, with some income groups exhibiting even higher elasticities (0.45). We first demonstrate that such an elasticity substantially modifies the response of government revenues to the 2004-2005 tax changes, and then quantify the impact of a hypothetical flat income tax scheme. Our calculations indicate that though there is room for a parallel improvement of budget revenues and after-tax income...

Approved for public release; distribution is unlimited; This thesis shows that a combination of "bracket creep" and legislated tax rate increases during the Edmund G. "Pat" Brown and Ronald Reagan governorships caused individual marginal tax rates to increase as much as 600 percent. A person earning $20,000 in 1958 was in the three percent bracket for state income taxes. Assuming this person received no real pay raises, his inflation-adjusted income in 1977 was now $41,938 and his marginal tax bracket was 11 percent. This person experienced a 355 percent increase in real taxes paid. The deadweight loss calculations show how bracket creep and legislated tax rate increases exacerbate deadweight loss. The more revenue the federal or state government tries to collect, the more deadweight loss society as a whole incurs. Using elasticities (of taxable income with respect to tax rates) ranging from .3 to 1.0, the incremental deadweight loss as a percent of incremental revenue collected from 10.6 percent for an elasticity of .3, to as high as 35.53 percent for an elasticity of 1.0. The deadweight loss calculations show that for every dollar in revenue collected, at least 10.7 cents to as much as 35.5 cents per dollar is lost to deadweight loss.; Lieutenant...

In this survey the author assemble recent theoretical and empirical advances in the literature on economic informality, analyzing the causes and costs of informality in developed and developing economies. In accordance with recent evidence, the author discusses the nature and the roots of informal economic activity across countries distinguishing between informality as the result of 'exclusion' and 'exit.' The author then provides an extensive review of recent international experience with policies aimed at reducing informality, in particular policies that facilitate the formalization process, create a framework for the transition from informality to formality, lend support to newly created firms, reduce or eliminate inconsistencies across regulation and government agencies, increase information flows, and increase enforcement.

Martin Feldstein's (1999) widely used taxable income formula for deadweight loss assumes the marginal social cost of evasion and avoidance equals the tax rate. This condition is likely to be violated in practice for two reasons. First, some of the costs of evasion and avoidance are transfers to other agents. Second, some individuals overestimate the costs of evasion and avoidance. In such situations, excess burden depends on a weighted average of the taxable income and total earned income elasticities, with the weight determined by the resource cost of sheltering income from taxation. This generalized formula implies the efficiency cost of taxing high income individuals is not necessarily large despite evidence that their reported incomes are highly sensitive to marginal tax rates.; Economics

In the “sufficient statistics” approach, the optimal tax rate is usually expressed as a function of tax elasticities that are often endogenous to other policy instruments available to the tax authority, such as the level of information, enforcement, etc. In this paper we provide evidence that both the magnitude and the anatomy of tax elasticities are extremely sensitive to a particular policy instrument: the level of tax enforcement. We exploit a natural experiment that took place in France in 1983, when the tax administration tightened the requirements to claim charitable deductions. The reform led to a substantial drop in the amount of contributions reported to the administration, which can be credibly attributed to overreporting of charitable contributions before the reform, rather than to a real change in giving behaviors. We show that the reform was also associated with a substantial decline in the absolute value of the elasticity of reported contributions. This finding allows us to partially identify the elasticity of overreporting contributions, which is shown to be large and inferior to − 2 in the lax enforcement regime. We further show using bunching of taxpayers at kink-points of the tax schedule that the elasticity of taxable income also experienced a significant decline after the reform. Our results suggest that failure to account for the effect of tax enforcement on both the magnitude and the anatomy of the elasticity of the tax base with respect to the net of tax rate can lead to misleading policy conclusions...

This paper is primarily concerned with the revenue and tax efficiency effects of adjustments to marginal tax rates on individual income as an instrument of possible tax reform. The hypothesis is that changes to marginal rates affect not only the revenue base, but also tax efficiency and the optimum level of taxes that supports economic growth. Using an optimal revenue-maximising rate (based on Laffer analysis), the elasticity of taxable income is derived with respect to marginal tax rates for each taxable-income category. These elasticities are then used to quantify the impact of changes in marginal rates on the revenue base and tax efficiency using a microsimulation (MS) tax model. In this first paper on the research results, much attention is paid to the structure of the model and the way in which the database has been compiled. The model allows for the dissemination of individual taxpayers by income groups, gender, educational level, age group, etc. Simulations include a scenario with higher marginal rates which is also more progressive (as in the 1998/1999 fiscal year), in which case tax revenue increases but the increase is overshadowed by a more than proportional decrease in tax efficiency as measured by its deadweight loss. On the other hand...