TAX EXEMPTIONS AS CONTRACTS

Tax Contracts and Government Formation

We examine how tax contracts affect government formation and welfare of voters in a parliamentary democracy. A tax contract specifies a range of tax rates a party is committed to if in government. We develop a new model of party competition and show that the introduction of tax contracts has two effects: a perks-reduction effect and a policy-shift effect. The former is dominant in societies wit...

Green Tax Reform in Sweden: The Second Dividend and the Cost of Tax Exemptions

This study assesses the cost of achieving pollution reductions using environmental taxes relative to using non-revenue-raising instruments. The cost of tax exemptions with or without employment constraints is also examined. Using a computable general equilibrium model of the Swedish economy a wide range of emission reduction target levels are examined. The study finds that the reduction of CO2 ...

Simple Labor Income Tax Systems with Endogenous Employment Contracts

In this paper, we use an anonymous and time-invariant progressive labor income tax system to implement the constrained social optimum in a setting where workers privately experience both persistent ability shocks and transient productivity shocks. We propose a framework to capture the interplay between welfare policies and firms’ contractual choices. In particular, we use the tax system to achi...

The Effect of the Sales Tax on Retail Prices and Employment: Evidence from Exemptions on Clothing

Using frequent state and local policy revisions of apparel tax exemptions in Connecticut, New York and Vermont, I study how the sales tax affects the retail market for apparel. First, I present new evidence on the effect of the sales tax on pre-tax prices, the pass-through rate. Unlike the previous literature on this topic, I employ detailed item-level data on prices, use large good-specific ch...

Ecological Tax Reform with Exemptions for the Export Sector in a two Sector two Factor Model