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The cost of capital was introduced almost thirty years ago and quickly became an indispensable tool for modelling the impact of tax policy on investment behavior. Within the past decade, the cost of capital has assumed a central role in tax reform debates through the closely related concept of the marginal effective tax rate. This book provides a comprehensive treatment of the cost of capital approach to tax policy analysis. Keeping the analytical level of this work has been kept to a minimum, the authors introduce complexities in a step by step fashion, leading up to a representation of tax systems for capital income that is suitable for tax policy analysis. The success of the cost of capital approach is due in large part to its ability to assimilate a virtually unlimited amount of descriptive detail on alternative tax policies. To provide guidance to students and tax policy professionals, this book contains a full implementation of the approach for the United States, including an analysis of the alternative proposals that culminated in the highly influential Tax Reform Act of 1986 in the United States. It also describes opportunities for further research and gives a complete and up-to-date bibliography to the rapidly expanding literature. This is the first in a series of Lectures in Monetary and Fiscal Policy at Uppsala University in honor of Erik Lindahl. ... Read more

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This book provides a comprehensive analysis of tax systems and tax reforms in a number of Latin American countries since the early 1990’s, including Argentina and Brazil, Costa Rica and Mexico, Paraguay, Colombia, Chile and Uruguay.

The authors present and discuss tax systems from a broad quantitative and historical perspective and describe the main taxes existing in each country, presenting the details of their institutional features. The existing interactions between the economic structure, the corporate tax system and the attraction of FDI inflows are of paramount importance and these issues are deeply analyzed in the book. A characteristic trait of the area is the proliferation of tax havens, particularly located in the Caribbean and in some other small islands, and the book provides an analysis of these havens and the counteractions adopted by the OECD countries. Finally, the book investigates the political economy of Latin America’s taxation, exploring why many of these countries have experienced a democratic transition but poor economic performances.

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Global warming is a serious threat to the stability of world climate and to economic prosperity in some regions. The book offers a theoretical analysis which focuses on double dividend issues. Moreover, the ecological tax reform in Germany and the options of modern energy policy are described and evaluated. The volume presents innovative model simulations and analyzes, in the context of the model, the benefits of a modified tax reform, based on a Schumpeterian approach. Finally, implications for the European Union and other countries are discussed. ... Read more

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The book suggests a novel way how the effects of tax reforms especially in the field of capital income taxation can be measured by means of dynamic computable general equilibrium (CGE) models. Using a model calibrated to the German economy, the author evaluates and quantifies the effects of introducing a Dual Income Tax (DIT) in Germany. This tax reform is a currently hotly debated topic in Germany and has been suggested both by the German Council of Economic Advisors (GCEA) and by Prof. Hans-Werner Sinn. Thus, the book is of great interest not only for the academic but also for the business world and politics.

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Tax reform proposals often include alterations to the corporate tax code. There are two main motivations for this. First, taxes that treat consumption as the base require extensive revisions to existing law. Depreciation rules, for example, are often replaced with expensing provisions. Second, it is widely acknowledged that the complexity of our existing tax code encourages aggressive tax management or "evasion" activities. Reform proposals often seek to make the code simpler and more transparent.

Tax reform proposals generated by economists often assume that the legal aspects will miraculously work themselves out—that the reform, if enacted, will work exactly as planned. But can any tax system eliminate costly evasion activity? In this volume, AEI visiting scholar Daniel N. Shaviro explores the causes and costs of tax avoidance and provides a useful guide to the key conceptual issues that must be addressed in order to design a truly effective tax reform.

In the first chapter, Shaviro attempts to identify the specific aspects of U.S. tax law that lead to extensive "paper pushing" in the interest of tax minimization, as well as a metric by which a tax authority can establish whether a particular tax planning action should be considered abusive or wasteful. In the second chapter, Shaviro explores tax arbitrages that are common among U.S. multinationals and discusses their economic consequences. Throughout, the author discusses policies that can soften the economic blow from avoidance activities.

Any fundamental tax reform will require rules to ensure that taxpayers face the incentives that are intended by reformers. This study is a valuable guide for those who must establish these rules. ... Read more

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For decades, policymakers at all levels of government have struggled to meet citizens' demands to contain the costs of health care, expand access to coverage and services, and maintain quality. Legislators' efforts to fix the current system have produced many counter-productive responses. Consumers have little freedom and few choices in purchasing health care. Empowering Health Care Consumers through Tax Reform offers a solution to this problem by proposing a system that provides a dynamic and competitive marketplace in which consumers make their own health care decisions. This book examines the option created by the intersection of health policy and tax reform.
Health policy analysts, economists, employer group and union representatives, physicians, and political leaders examine the crucial link between two major domestic policy issues to explore a revolutionary idea: that health-care costs can be contained and access to care vastly expanded by joining health care reform with tax reform. The contributors describe the distortions in the health care system caused by our current tax policy and paint their vision of a vibrant and responsive free-market system.
This vision of tax reform coupled with health reform is offered as a win-win scenario for consumers, the medical profession, policymakers, and the future U.S. health care system.
"This book shows how tax reform can lead to more appropriate and more affordable health insurance. It is worth careful reading by our policy makers and by anyone concerned with health care in America." --Martin Feldstein, Professor of Economics, Harvard University and Former Chairman, President's Council of Economic Advisors
Grace-Marie Arnett is president of the Galen Institute, a public policy research organization based in Alexandria, Virginia, that focuses on health and tax policy.
... Read more

Customer Reviews (1)

No Demagoguery, Just Common-Sense Solutions
Health care reform has been a prominent issue in this year's presidentialelection and will be a top priority for the next administration.In spiteof the campaign rhetoric, however, a political consensus armed withconcrete solutions has remained elusive.The largest push for health carereform has come from liberal Democrats.They claim that working Americansfork over too much money to a health care system that is low in quality andleaves too many out in the cold.To some extent, these critics arecorrect.Health care costs have been surging for years and there is adisturbing number of Americans who do not have insurance.These trends areespecially alarming with the graying of the Baby Boom generation. Unfortunately, the shortcomings of our health system have become an excusefor more government intervention in the economy.Nearly all of the reformproposals in Washington insist on tighter government control over anindustry which wields the power of life and death - literally.The newpower would then rest in bureaucracies possessing the compassion of the IRSand the efficiency of the post office. For those Americans who supportreform but suspect the ability of Washington, this book will raise yourconscience and offer real solutions.The theme is that shortcomings in ourhealth care system do not imply that the private sector can not work inthis part of the economy.The authors point out that, surprisingly, theprivate market has never been given a chance to work here.Health care isactually the most regulated industry in America.The authors suggest thatinstead of imposing more regulation and adding more levels of bureaucracy,policymakers should take a more original approach.They recommendreforming the tax code by injecting an ounce of capitalism and a pound ofreality to the system.One specific reform would be to eliminate thepeculiar rule that employer contributions to group health insurance doesn'tcount as taxable income for employees.This tax ruling, an historicalaccident arising out of World War II, has created a strong incentive forthe private health insurance market to be organized around employment-basedgroups.This preference, according to the authors, is at the root of themany of our problems.The policy distorts the health care marketplace.Itundermines cost consciousness by disguising the true cost of medical care. Insufficient health care is subsidized.Further, the current lawdiscriminates against the self-employed, the unemployed, and those whoseemployers don't offer health insurance.This subsidy, worth close to $100billion a year, is highly regressive: It provides a generous subsidy forthe chief executive of a company and little for a young couple strugglingto make ends meets.The authors suggest that the $100 billion should bereturned immediately to citizens in the form of a tax credit, deduction, orvoucher for purchasing health insurance.By giving consumers more directcontrol over their health coverage, it would enable them to force changethrough the market rather through the political system.This reform wouldgive individuals more choice and create new incentives for aconsumer-driven market that is more efficient and more dignified.Ofcourse, eliminating the employer subsidy and other reforms aren't apanacea.There are trade-offs involved; some Americans may lose privilegeswhile others gain.But the authors are confident that these policy reformswould cut costs and increase coverage while also removing Washington fromanother area where it doesn't belong.Clearly, public education is needed. The stalemate over the issue will not continue indefinitely.EitherWashington will create more meddlesome and burdensome federal healthprograms or it will fix the distortions in the private market, as advocatedin this book.In this life-and-death matter, the political judgement ismuch in doubt. ... Read more

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Tax Reform in Developing Countries carefully examines the experience of eight developing countries that have undergone -- and in some instances are still undergoing -- significant and comprehensive tax reform. The countries are Bolivia, Colombia, Indonesia, Jamaica, Korea, Mexico, Morocco, and Turkey. It draws on their experiences to find lessons learned and to see how they may be applied to other countries on the road to tax reform. Equal attention is given to the process of tax reform, how it is implemented, and the substance or results of reform efforts. Throughout, the focus is on the practical rather than the theoretical aspects of tax reform. ... Read more

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Do Taxes Matter? is the first systematic examination of the actual effects of the Tax Reform Act of 1986, the most important U.S. income tax reform of the last four decades. It presents basic information on and an analysis of a variety of different aspects of economic behavior in order to discover whether the observed changes coincide with the predictions of standard public finance models. Prior to implementation of the new law, supporters and opponents made numerous forecasts about its effect on savings, corporate investment, and other major determinants of the country's economic health. The general finding of these original contributions is that the effects of tax reform turned out to be smaller than had been anticipated.

Commissioned by the Office of Tax Policy Research of the University of Michigan, eight of the studies focus on different sectors of the economy, reviewing the predictions and carefully analyzing the evidence to determine actual effects. The ninth study draws together the results to find lessons for future changes in tax policy. Joel Slemrod is Professor of Business Economics and Public Policy and Director of the Office of Tax Policy Research at the University of Michigan.

Contents: The Economic Impact of Tax Reform Act of 1986, Joel Slemrod. Investment, Tax Policy, and the Tax Reform Act of 1986, Alan J. Auerbach, Kevin Hassett. The Impact of the 1986 Tax Reform on Personal Saving, Jonathan Skinner, Daniel Feenberg. Effects of the Tax Reform Act of 1986 on Corporate Financial Policy and Organizational Form, Roger H. Gordon, Jeffrey K. MacKie­Mason. Taxation and Housing Markets: Preliminary Evidence on the Effects of Recent Tax Reforms, James M. Poterba. The Impact of the Tax Reform Act of 1986 on Foreign Direct Investment to and from the United States, Joel Slemrod. The Impact of Tax Reform on Charitable Giving: A 1989 Perspective, Charles T. Clotfelter. The Impact of the Tax Reform Act of 1986 on State and Local Fiscal Behavior, Paul N. Courant, Edward M. Gramlich. Foreign Responses to U.S. Tax Reform, John Whalley. Lessons for Tax Reform, Henry J. Aaron. ... Read more

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Many people have serious concerns about the environment and wonder whether solving environmental problems is compatible with continuing economic growth. This book provides an in-depth exploration of a proposed reform to the national tax system, whereby the burden of taxes is shifted from conventional taxes, such as those levied on labour and capital, to taxes on environmentally related activities, that involve resource use, particularly energy, or environmental pollution. There is some experience of such 'environmental tax reform' (ETR) in Europe, and the book briefly reviews this before considering how a more ambitious ETR in Europe could substantially reduce greenhouse gas emissions and material flows through the economy, while stimulating innovation and investment in the key 'clean and green' sectors of the economy which seem likely to play an increasing part in the creation of prosperity in Europe and elsewhere in the future.

Case studies of renewable energy, construction, fuel-efficient vehicles, and waste management in Germany show how these fast-growing sectors are making an increasing contribution to employment, output, and exports in the German economy, while improving the environment. The book explores the implications of introducing it on a much wider scale throughout the European Union. A unique modelling exercise, using two macroeconomic models, delivers varied and complementary insights into the economic and environmental results of a large-scale ETR in Europe, and its effects on and implications for the rest of the world. The modelling suggests that such a policy has a key role in the achievement of Europe's targets to reduce its greenhouse gas emissions, and, if implemented with cooperative policy in other countries, could significantly reduce global emissions.

The book is essential and hopeful reading for anyone who has wondered how, with today's intensifying environmental challenges, economic growth could become more environmentally sustainable. ... Read more

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The fall of the Soviet Union in 1991 brought enormous political, economic, and social challenges. Since 1991 fiscal reform has been a pillar of Russia's reform agenda. This book analyzes the effort to adopt a modern tax code where previously there were few recognizable taxes, establish an efficient tax administration where taxpayers had never paid taxes directly, and decentralize the system of governance where power had been centralized and dictatorial. Despite the remarkable achievements, many old and new challenges remain. The authors bring an analytical approach to the study of fiscal reform in Russia and draw lessons for fiscal reform in other countries providing a detailed economic analysis of the tax system and estimates of tax compliance and evasion. This book offers a detailed examination of the fiscal architecture of Russia and concludes with a presentation of remaining reform needs and options for Russia. Given the dynamic nature of Russia's economic development, this book will prove a timely and informative resource for academics in economics, public finance, political science and public administration as well as for policy makers.It's lessons will also be useful for officials involved with finance in transition and developing countries and those in NGOs. ... Read more