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Taxation (Responses to Taxation (W3: Taxes and Labour Supply (Non…
Taxation
Responses to Taxation
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W4: Migration
- Migration is a significant response to tax incentives at the top of the income distribution
- However, at the bottom of the income distribution, non-tax factors seem to be the primary cause
W9: Tax Evasion
Models:
- Allingham-Sandmo model:
- Kleven et al model: Found that third party information reporting is able to significantly reduce tax evasion (due to the increased probability of detection).
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Optimal Taxation
W7: Commodity Taxation
Justifications:
- Ramsey taxation (satisfying a revenue requirement)
- Equity
- Externalities
- Internalities & paternalism
Ramsey Rule: More elastic goods should be taxed less as compared to other goods. This is because behavioural response is greater.
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W1: Incidence
Traditional Model of Tax Incidence
- Statutory burden of tax does not describe economic incidence
- Remittance obligation is irrelevant to the distribution of economic burden
- Parties with inelastic demand/supply bear burden of tax
Empirical Application
- Behavioural frictions can affect elasticities/incidence, and break the classical neutrality result
- Imperfect competition can greatly change incidence of policy changes
W2: Welfare Programmes
Solutions to information asymmetry:
- Tagging
- In-kind benefits (Nickhols-Zeckhauser)
- Ordeals
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