Swedish Tax Rates, Labor Supply, and Tax Revenues

Stuart, Charles E.

doi:10.1007/978-1-349-17563-5_10

Cited by 18 publications

(24 citation statements)

References 11 publications

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“…7See Stuart (1981). Our camputed tax rates for 1979 fit well with Stuartls (1981) linear relation between t and t l for five year intervals from 1954 to 1974.…”

Section: Model Specificationsupporting

confidence: 51%

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Sweden's Laffer Curve: Taxation and the Unobserved Economy

Feige¹,

McGee²

1983

The Scandinavian Journal of Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractRecent research on the unobser'ved economy sugges ts that the phenomenon has important implications for both macroeconomic policy and public finance. This paper focuses attention on the public finance implications by developing a simple macromodel from which it is possible to derive a Laffer curve. The model reveals that the shape and position of the Laffer curve depend upon the strength of supply side.effects, the progressivity of the tax systern and the size of the unobserved economy. Using alternative parameterizations of each of these effects, it is possible to obtain rough empirical estimates of the Laffer curve for Sweden. and where various economies are on their curves, it is generally accepted that the dependence of tax revenues on tax rates is too oversimplified in standard macroeconomic theory to deal with these issues. To remedy this deficiency we present a highly aggregat ed supply side model that attempts to elucidate some of the main issues involved.The amount of tax revenue realized under any particular legislated income tax rate structure depends at the aggregate levelon three basic and distinct influences. First there is a supply side effect on tax revenues. The tax base is influenced by the existence of taxes which alter the set of profit and utility maximizing capital and labor choices. In general there will be same tendency to withdraw capita 1 and l abor from the market as tax rates increase, leaving less incentive to participate in taxed mark et production. 2Leisure and non-taxed home production activities are made relatively more attractive by higher tax rates. Likewise the use of capital in home production and the abandonment of capital projects may increase as capital income from market production is increasingly taxed. The extent of supply side tax base shrinkage will depend on the degree of substitution factor owners engage in between the untaxed home and taxed mark et sectors. This substitution depends on the e1asticity of the labor and capital supplies.There is~ in addition, a second potential source of tax base shrinkage due to higher taxes. Even if factor supplies are relatively inelastic, this second source can create a limit to tax revenues below 100% taxation. Rather than withdrawing labor and capital services from the market, individuals may react to higher tax rates by simp1y continuing their activities but refusing to report them and pay taxes on them. Hence the tax bas...

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“…7See Stuart (1981). Our camputed tax rates for 1979 fit well with Stuartls (1981) linear relation between t and t l for five year intervals from 1954 to 1974.…”

Section: Model Specificationsupporting

confidence: 51%

“…It differs from other models, such as Stuart's (1981), in three basic respects. Second, we have al10wed the capital stock to respond to tax changes.…”

mentioning

confidence: 99%

Sweden's Laffer Curve: Taxation and the Unobserved Economy

Feige¹,

McGee²

1983

The Scandinavian Journal of Economics

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“…Moreover, untaxed ('underground') sector of the economy, including tax avoidance and tax evasion activity, is considered as a 'non-working time'. The simplification of this methodology has also been used by Lindbeck (1982) and Stuart (1981). In this way, our study will contain only 'work versus leisure' phenomena.…”

Section: Introductionmentioning

confidence: 99%

To Work More or Less? The Impact of Taxes and Life Satisfaction on the Motivation to Work in Continental and Eastern Europe

Nadirov

Aliyev

Dehning

2017

Economics &Amp; Sociology

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ABSTRACT.Using country-level data from 2000-2013, we test the relationship between life satisfaction (measured as how people evaluate their life as a whole rather than their current feelings) and the motivation to work (measured as aggregate hours of work). Our hypothesis is that even after controlling for average labor income tax rates in countries with high and low average hours worked, there is a significant negative association between the motivation to work and life satisfaction. The main findings of this paper are that the increase in the motivation to work per employee comes at the expense of life satisfaction, and differences in average tax rates on labor income cannot account for differences in time allocation. Once life satisfaction is included, the hypotheses of previous neoclassical economic studies are almost irrelevant in determining the response of market hours to higher average tax rates on labor income. In line with our assumption, we find a negative relationship between life satisfaction and the motivation to work in the cross-country examinations. In countries with the highest hours worked (Hungary, Estonia), wealth is generally preferred to leisure and in countries with the lowest hours worked (France, Germany), leisure is preferred to wealth. JEL Classification: H20, J01, J29

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“…About a decade ago, several studies were published that found high excess burdens for the United States and other countries, like Sweden and the Netherlands (Stuart, 1981;Browning and Johnson, 1984;Hausman and Ruud, 1984;Stuart, 1984;Browning, 1987;Van Ravestijn and Vijlbrief, 1988;Hartog, 1989). Since that time many countries have implemented tax reform and reduced marginal tax rates, but even so, in many countries deadweight welfare losses must have remained at high levels.…”

Section: Introductionmentioning

confidence: 99%

If we knew ability, how would we tax individuals?

Plug

Praag

Hartog

1999

Journal of Public Economics

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If we knew ability, how would we tax individuals?Plug, E.J.S.; van Praag, B.M.S.; Hartog, J. General rightsIt is not permitted to download or to forward/distribute the text or part of it without the consent of the author(s) and/or copyright holder(s), other than for strictly personal, individual use, unless the work is under an open content license (like Creative Commons). Disclaimer/Complaints regulationsIf you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library: http://uba.uva.nl/en/contact, or a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible. AbstractThe suggestion to tax people on earnings capacity instead of earnings has been around for a long time and is attractive in terms of economic efficiency. In this paper we reflect on the feasibility of such a system and give an exploratory empirical implementation. We apply the Leyden Welfare Function of Income, a survey based measure of an individual's welfare associated with income, to derive implications for ability taxation. Under the assumption that IQ and schooling reflect earnings capacity, we derive the tax functions using different criteria to distribute the utility loss due to taxation.

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Swedish Tax Rates, Labor Supply, and Tax Revenues

Cited by 18 publications

References 11 publications

Sweden's Laffer Curve: Taxation and the Unobserved Economy

Sweden's Laffer Curve: Taxation and the Unobserved Economy

To Work More or Less? The Impact of Taxes and Life Satisfaction on the Motivation to Work in Continental and Eastern Europe

If we knew ability, how would we tax individuals?

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