Bernard et al. (2015) study an optimal insurance design problem where an individual’s preference is of the rank-dependent utility (RDU) type, and show that in general an optimal contract covers both large and small losses. However, their contracts suffer from a problem of moral hazard for paying more compensation for a smaller loss. This paper addresses this setback by exogenously imposing the constraint that both the indemnity function and the insured’s retention function be increasing with respect to the loss. We characterize the optimal solutions via calculus of variations, and then apply the result to obtain explicitly expressed contracts for problems with Yaari’s dual criterion and general RDU. Finally, we use a numerical example to compare the results between ours and that of Bernard et al. (2015).
Bernard等人(2015)研究了一个最优保险设计问题，其中个人的偏好是等级依赖效用(RDU)类型，并表明通常最优契约涵盖了大损失和小损失。然而，他们的合同存在道德风险问题，即为较小的损失支付更多的赔偿。本文通过外生施加补偿函数和被保险人保留函数随损失增加的约束来解决这一挫折。我们利用变分法对最优解进行了刻画，然后将结果应用于具有Yaari对偶准则和一般RDU的问题的显式表达契约。最后，我们使用一个数值例子来比较我们的结果与Bernard et al.(2015)的结果。
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The charitable contribution deduction is in peril, a potential casualty in the looming budget wars of 2013. All of the major tax reform proposals, from President Obama and Governor Romney to the Bowles-Simpson Deficit Commission, call for modifying, capping, or eliminating the charitable deduction to pay for tax cuts, spending or both. With its passing, charitable organizations will lose an important source of financial support, but we as Americans stand to lose much more than that. The charitable deduction protects our freedom to create, fund, and operate the institutions that make up American civil society with minimal interference from the government. It is a negotiated bargain between citizens and the state, establishing a delicate balance of power. Much as we might like to see balanced budgets and low tax rates in the short term, sacrificing the charitable deduction is not the best means of accomplishing these priorities. This paper argues that the appropriation of revenue by the federal government from the nonprofit sector by altering the charitable deduction entails a profound renegotiation of the relationship between the government and civil society, and it runs counter to the policy and spirit of American democracy.
{"title":"Renegotiating the Charitable Deduction","authors":"Alexander Reid","doi":"10.2139/ssrn.2155994","DOIUrl":"https://doi.org/10.2139/ssrn.2155994","url":null,"abstract":"The charitable contribution deduction is in peril, a potential casualty in the looming budget wars of 2013. All of the major tax reform proposals, from President Obama and Governor Romney to the Bowles-Simpson Deficit Commission, call for modifying, capping, or eliminating the charitable deduction to pay for tax cuts, spending or both. With its passing, charitable organizations will lose an important source of financial support, but we as Americans stand to lose much more than that. The charitable deduction protects our freedom to create, fund, and operate the institutions that make up American civil society with minimal interference from the government. It is a negotiated bargain between citizens and the state, establishing a delicate balance of power. Much as we might like to see balanced budgets and low tax rates in the short term, sacrificing the charitable deduction is not the best means of accomplishing these priorities. This paper argues that the appropriation of revenue by the federal government from the nonprofit sector by altering the charitable deduction entails a profound renegotiation of the relationship between the government and civil society, and it runs counter to the policy and spirit of American democracy.","PeriodicalId":408504,"journal":{"name":"SIRN: Financing System (Payroll Tax","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127551167","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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