This paper analyzes the effect of personal income taxation on the sensitivity of executive compensation to company performance and the use of stock option and restricted stock grants underlying this sensitivity. The theoretical model predicts that, if a single tax rate applies to the entire compensation package, an increase in the tax rate weakly diminishes the equilibrium level of managerial e...

This paper uses a dynamic general equilibrium model to analyze and quantify the aggregate effects of the timing of the tax rate changes enacted in 2001 and 2003. The 2001 law called for a sequence of successive rate reductions from 2001 until 2006. The 2003 law made immediate the tax rate cuts scheduled for 2004 and 2006 under the earlier law. The phased-in nature of the tax cuts under the 2001...

a r t i c l e i n f o The impacts of changing the number of individuals of a particular skill level on the solutions to two versions of the finite population optimal nonlinear income tax problem are investigated. In one version, preferences are quasilinear in leisure. For this version, it is shown that it is possible to sign the directions of change in everyone's optimal consumptions and optima...

Of necessity, many tax-price elasticities are calculated from tax return data. Survey data on families’ charitable giving and reporting on their tax returns indicate that reporting is a significant part of tax-price elasticity estimates. Roughly a quarter of the tax-price elasticity estimated from tax returns represents changes in reporting as opposed to changes in actual donations. These resul...

Observed changes in corporation tax revenues from year to year, which include the effects of changes in tax rates, deductions and compliance, appear to be highly volatile relative to profits, the tax base. This paper examines whether the ‘built-in’ fiscal drag properties of corporation tax can be expected to display similar properties. Simple, conceptual modelling demonstrates that the corporat...

We provide empirical evidence on the effects of tax liability changes in the United States. We distinguish between “surprise” and “anticipated” tax shocks. We find that surprise tax cuts have expansionary and persistent effects on output, consumption, investment and hours worked. Prior to their implementation, anticipated tax liability tax cuts give rise to contractions in output, investment an...

We examine exogenous changes in state corporate income taxes over the 1988-2006 period and find that tax decreases significantly boost both the quantity, measured by the number of patents, and the quality, measured by citations per patent, of innovative output, while tax increases have little impact on innovation. Most of the impact of tax changes on innovation occurs two or more years after th...

Bovenberg and de Mooij (1994) showed that, in the presence of preexisting distorting taxes, the optimal pollution tax typically lies below social marginal damages. The authors view this result as a refutation of the so-called "double dividend hypothesis," which suggests that a tax on pollution can both improve the environment and reduce distortions in the tax system. Their paper spawned a large...

The tax-expenditure hypothesis posed by Milton Friedman emphasizes a positive causal relationship between government tax revenues and government expenditures. If citizens do not have a correct perception of the real tax burden and under-estimate the price of public goods and services, there is a negative causal relationship between tax revenues and government expenditures, which indicates exist...