This essay provides some observations about the relationship of politics and taxation and reviews... more This essay provides some observations about the relationship of politics and taxation and reviews the articles and commentaries that were prepared for the Third Annual NYU/UCLA Tax Policy Conference on Politics and Taxation held in Los Angeles on October 18, 2013. Understanding the relationship between politics and taxation is important for several reasons. First, it may help explain why countries adopt different taxing and spending patterns. It may also explain why the frequency, success and stability of tax reform efforts vary among countries. Finally a better understanding of politics and taxation may provide insights into such questions on how institutions shape policy outcomes and how tax policy may contribute to successful democratic governments.The four articles and commentaries cover a wide range of issues. The first article, by Larry Zelenak, examines the controversy generated by Mitt Romney’s remarks in the 2012 presidential campaign about the 47% percent of Americans who pay no income tax. The second article, by Colin McCubbins and Mathew McCubbins, reviews the effectiveness of voter initiatives and propositions in limiting the taxing power of elected officials. The third article, by Michael Doran, examines traditional policy explanations and legislator-motivation explanations to understand the tax legislative process and offers additional factors that may explain legislative behavior in the contemporary U.S. Congress. The final article, by Andrea Campbell, explores how attitudes towards taxes held by different groups in society may have changed during the Obama era.
The purpose of this brief is to correct and respond to two arguments in Petitioner-Appellee Alter... more The purpose of this brief is to correct and respond to two arguments in Petitioner-Appellee Altera’s petition for rehearing en banc and briefs of amici supporting the petition for rehearing. First, Treasury’s regulation requiring cost sharing of stock-based compensation and the Ninth Circuit panel’s decision are entirely consistent with longstanding precedents, practices and understandings regarding the meaning of the arm’s length standard. Second, reversal of the U.S. Tax Court by a Court of Appeals is an ordinary occurrence that reflects the federal courts’ hierarchy and is not a basis for granting en banc review.
... See James Aim & Sally Wallace, Can Developing Countries Impose an Individual Income Tax? ... more ... See James Aim & Sally Wallace, Can Developing Countries Impose an Individual Income Tax? (unpublished paper presented at "The Challenges of Tax Reform in ... State Univ., May 24-25, 2004) available at http://www.aysps.gsu.edutpublications/2004/alm/indiv-incometax/pdf. ...
With the exception of a few North African countries, personal income taxes (PITs) play little or ... more With the exception of a few North African countries, personal income taxes (PITs) play little or no role in the Middle East and North Africa (MENA), often yielding less than 2 percent of gross domestic product (GDP) in revenue. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Throughout the region, top marginal tax rates on labour and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue contribution from this source remains low throughout the region, averaging less than 1 percent of GDP and concentrated in oil-importing non-fragile states. Social security contributions (SSCs) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes and levies. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increases in SSCs has resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT and SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance revenue and equity objectives against efficiency objectives (in particular, labour market incentives and informality). Countries without a PIT will have to weigh whether a consumption tax/SSC system that mimics a flat tax on labour income is sufficient to diversify revenue away from oil, and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, which face more political volatility and have weaker fiscal institutions than non-fragile states, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
Scholars have examined how inequality influences the development of different types of institutio... more Scholars have examined how inequality influences the development of different types of institutions. This article takes a historical perspective to examine how economic inequality and challenges to collective action may have contributed to different taxing and spending patterns of state and local governments in the United States. Particularly before the Great Depression, differences existed in the absolute and relative size of state and local governments, the use of various tax instruments to fund government operations, and the size and nature of spending programs. The evidence suggests that those areas with greater economic equality chose to acquire common goods and services collectively and to impose taxes to fund those expenditures at a greater relative level than areas with greater inequality. These patterns continued through World War II, and, to a much lesser extent, to the present day. This article also examines the substantial changes in the relative roles of local, state, and federal governments in assessing taxes and providing common goods and services.
Inequality and Taxation: Evidence from the Americas on How Inequality May Influence Tax Instituti... more Inequality and Taxation: Evidence from the Americas on How Inequality May Influence Tax Institutions KENNETH L. SOKOLOFF* AND ERIC M. ZOLT** I. Introduction When tax scholars explore how taxation influences inequality, they focus on how tax systems may alter the after ...
Academics and others over the last 50 years have called for developing countries to hesitate or r... more Academics and others over the last 50 years have called for developing countries to hesitate or refrain from entering into bilateral tax treaties with developed countries. Tax treaties seek to facilitate cross-border transactions and investments by reducing tax barriers and providing greater certainty to foreign investors. But treaty provisions invariably result in countries yielding taxing rights. Since at least the 1920s, treaties have arguably provided greater taxing rights to the country where the investors reside (generally, capital-exporting developed countries) rather than the country where the economic activity takes place (often, capital-importing developing countries). Where capital flows are roughly equal between countries, rules that skew taxing rights towards residence-based taxation away from source-based taxation result in little or no revenue shifting. But where capital flows are less even, the tax revenue consequences may be substantial. Critics of tax treaties betw...
This essay provides some observations about the relationship of politics and taxation and reviews... more This essay provides some observations about the relationship of politics and taxation and reviews the articles and commentaries that were prepared for the Third Annual NYU/UCLA Tax Policy Conference on Politics and Taxation held in Los Angeles on October 18, 2013. Understanding the relationship between politics and taxation is important for several reasons. First, it may help explain why countries adopt different taxing and spending patterns. It may also explain why the frequency, success and stability of tax reform efforts vary among countries. Finally a better understanding of politics and taxation may provide insights into such questions on how institutions shape policy outcomes and how tax policy may contribute to successful democratic governments.The four articles and commentaries cover a wide range of issues. The first article, by Larry Zelenak, examines the controversy generated by Mitt Romney’s remarks in the 2012 presidential campaign about the 47% percent of Americans who pay no income tax. The second article, by Colin McCubbins and Mathew McCubbins, reviews the effectiveness of voter initiatives and propositions in limiting the taxing power of elected officials. The third article, by Michael Doran, examines traditional policy explanations and legislator-motivation explanations to understand the tax legislative process and offers additional factors that may explain legislative behavior in the contemporary U.S. Congress. The final article, by Andrea Campbell, explores how attitudes towards taxes held by different groups in society may have changed during the Obama era.
The purpose of this brief is to correct and respond to two arguments in Petitioner-Appellee Alter... more The purpose of this brief is to correct and respond to two arguments in Petitioner-Appellee Altera’s petition for rehearing en banc and briefs of amici supporting the petition for rehearing. First, Treasury’s regulation requiring cost sharing of stock-based compensation and the Ninth Circuit panel’s decision are entirely consistent with longstanding precedents, practices and understandings regarding the meaning of the arm’s length standard. Second, reversal of the U.S. Tax Court by a Court of Appeals is an ordinary occurrence that reflects the federal courts’ hierarchy and is not a basis for granting en banc review.
... See James Aim & Sally Wallace, Can Developing Countries Impose an Individual Income Tax? ... more ... See James Aim & Sally Wallace, Can Developing Countries Impose an Individual Income Tax? (unpublished paper presented at "The Challenges of Tax Reform in ... State Univ., May 24-25, 2004) available at http://www.aysps.gsu.edutpublications/2004/alm/indiv-incometax/pdf. ...
With the exception of a few North African countries, personal income taxes (PITs) play little or ... more With the exception of a few North African countries, personal income taxes (PITs) play little or no role in the Middle East and North Africa (MENA), often yielding less than 2 percent of gross domestic product (GDP) in revenue. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Throughout the region, top marginal tax rates on labour and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue contribution from this source remains low throughout the region, averaging less than 1 percent of GDP and concentrated in oil-importing non-fragile states. Social security contributions (SSCs) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes and levies. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increases in SSCs has resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT and SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance revenue and equity objectives against efficiency objectives (in particular, labour market incentives and informality). Countries without a PIT will have to weigh whether a consumption tax/SSC system that mimics a flat tax on labour income is sufficient to diversify revenue away from oil, and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, which face more political volatility and have weaker fiscal institutions than non-fragile states, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
Scholars have examined how inequality influences the development of different types of institutio... more Scholars have examined how inequality influences the development of different types of institutions. This article takes a historical perspective to examine how economic inequality and challenges to collective action may have contributed to different taxing and spending patterns of state and local governments in the United States. Particularly before the Great Depression, differences existed in the absolute and relative size of state and local governments, the use of various tax instruments to fund government operations, and the size and nature of spending programs. The evidence suggests that those areas with greater economic equality chose to acquire common goods and services collectively and to impose taxes to fund those expenditures at a greater relative level than areas with greater inequality. These patterns continued through World War II, and, to a much lesser extent, to the present day. This article also examines the substantial changes in the relative roles of local, state, and federal governments in assessing taxes and providing common goods and services.
Inequality and Taxation: Evidence from the Americas on How Inequality May Influence Tax Instituti... more Inequality and Taxation: Evidence from the Americas on How Inequality May Influence Tax Institutions KENNETH L. SOKOLOFF* AND ERIC M. ZOLT** I. Introduction When tax scholars explore how taxation influences inequality, they focus on how tax systems may alter the after ...
Academics and others over the last 50 years have called for developing countries to hesitate or r... more Academics and others over the last 50 years have called for developing countries to hesitate or refrain from entering into bilateral tax treaties with developed countries. Tax treaties seek to facilitate cross-border transactions and investments by reducing tax barriers and providing greater certainty to foreign investors. But treaty provisions invariably result in countries yielding taxing rights. Since at least the 1920s, treaties have arguably provided greater taxing rights to the country where the investors reside (generally, capital-exporting developed countries) rather than the country where the economic activity takes place (often, capital-importing developing countries). Where capital flows are roughly equal between countries, rules that skew taxing rights towards residence-based taxation away from source-based taxation result in little or no revenue shifting. But where capital flows are less even, the tax revenue consequences may be substantial. Critics of tax treaties betw...
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