Pub Date : 2019-12-27DOI: 10.32721/ctj.2019.67.4.fon
K. Mckenzie
In this article, Ken McKenzie presents calculations of the tax burden based on average wages in Canada's provinces and territories, using the methodology adopted by the Organisation for Economic Co-operation and Development in its Taxing Wages‹/i› publication.
{"title":"Finances of the Nation: Taxing Wages in Canada, 2001-2018","authors":"K. Mckenzie","doi":"10.32721/ctj.2019.67.4.fon","DOIUrl":"https://doi.org/10.32721/ctj.2019.67.4.fon","url":null,"abstract":"In this article, Ken McKenzie presents calculations of the tax burden based on average wages in Canada's provinces and territories, using the methodology adopted by the Organisation for Economic Co-operation and Development in its Taxing Wages‹/i› publication.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"305 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116195040","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}
Pub Date : 2019-12-27DOI: 10.32721/ctj.2019.67.4.pf.locke
W. Locke, Douglas May
When the government of Newfoundland and Labrador assumed office in late 2015, it declared that the expected deficit for the current fiscal year would be almost double that which was budgeted for by the predecessor government. The new government then adopted a very aggressive fiscal-policy stance in its first budget, tabled in April 2016. However, following the finance minister's resignation in July 2017, the government seemed to dramatically change its strategy, adopting a passive policy response to the worsening deficit situation. While in subsequent years Newfoundland and Labrador's annual deficit has fallen, its net and gross debt per capita have ballooned and reached new heights relative to Canada's other provinces. This article presents an in-depth investigation of this expansion and examines the probabilities of success, in the medium and long term, of the government's current fiscal strategy as a response to its deepening debt problem.
{"title":"Policy Forum: Newfoundland and Labrador's Debt Strategy—Waiting for a Saviour or Godot?","authors":"W. Locke, Douglas May","doi":"10.32721/ctj.2019.67.4.pf.locke","DOIUrl":"https://doi.org/10.32721/ctj.2019.67.4.pf.locke","url":null,"abstract":"When the government of Newfoundland and Labrador assumed office in late 2015, it declared that the expected deficit for the current fiscal year would be almost double that which was budgeted for by the predecessor government. The new government then adopted a very aggressive fiscal-policy stance in its first budget, tabled in April 2016. However, following the finance minister's resignation in July 2017, the government seemed to dramatically change its strategy, adopting a passive policy response to the worsening deficit situation. While in subsequent years Newfoundland and Labrador's annual deficit has fallen, its net and gross debt per capita have ballooned and reached new heights relative to Canada's other provinces. This article presents an in-depth investigation of this expansion and examines the probabilities of success, in the medium and long term, of the government's current fiscal strategy as a response to its deepening debt problem.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117065899","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}
Among the many contributions that Judith Freedman has made to tax law and policy in the United Kingdom and around the world, one of the most sustained and significant involves the regulation and taxation of small business. This article reviews Professor Freedman’s contributions to tax law and policy regarding small business, and evaluates Canadian experience with the taxation of private companies and their shareholders in light of Professor Freedman’s work. Part II summarizes Professor Freedman’s main conclusions regarding the taxation of small business, addressing both the taxation of similar economic activities conducted through different legal forms and the rationale and effectiveness of special tax preferences for small business. Part III examines Canadian experience with the taxation of private companies and their shareholders, illustrating the ways in which Professor Freedman’s concerns about structural tax differentials and tax preferences for small business have played out in the Canadian context. Part IV concludes with a few observations about how best to promote simplicity, neutrality and coherence in the taxation of small business.
{"title":"Income Taxation of Small Business: Toward Simplicity, Neutrality and Coherence","authors":"D. Duff","doi":"10.2139/ssrn.3503094","DOIUrl":"https://doi.org/10.2139/ssrn.3503094","url":null,"abstract":"Among the many contributions that Judith Freedman has made to tax law and policy in the United Kingdom and around the world, one of the most sustained and significant involves the regulation and taxation of small business. This article reviews Professor Freedman’s contributions to tax law and policy regarding small business, and evaluates Canadian experience with the taxation of private companies and their shareholders in light of Professor Freedman’s work. Part II summarizes Professor Freedman’s main conclusions regarding the taxation of small business, addressing both the taxation of similar economic activities conducted through different legal forms and the rationale and effectiveness of special tax preferences for small business. Part III examines Canadian experience with the taxation of private companies and their shareholders, illustrating the ways in which Professor Freedman’s concerns about structural tax differentials and tax preferences for small business have played out in the Canadian context. Part IV concludes with a few observations about how best to promote simplicity, neutrality and coherence in the taxation of small business.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"469 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116413166","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}
The Supplemental Nutrition Assistance Program (SNAP) pays for around 15% ($70 billion) of US food-store consumption each year. We assess the impact of SNAP disbursements on real consumption over the Great Recession and the ensuing decade. We document the payment formula as specified in government computer codes used to audit SNAP, and use the codes to simulate how the payments would have evolved had recipient characteristics remained fixed at pre-specified levels. Using national scanner data available since 2006 and the simulated instrument, we estimate that a 1% increase in SNAP benefits per population led to a persistent 0.08% increase in grocery prices. We verify long and flat pre-trends, sharp timing, and stronger effects in counties where the recipient share of the population is larger. Estimates of marginal propensities to consume food (MPCF) support past findings. We develop and calibrate a partial equilibrium model, both to test the consistency of the findings with theory and to interpret the results. A marginal dollar of benefits raises the recipient’s consumer surplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAP consumer’s surplus by $0.06, because of the large MPCF out of SNAP, low elasticities of demand, and market power. If the objective of SNAP is to guarantee the intended floor of real spending power on food, federal maximum benefits should be increased by 10% to account for the price response.
{"title":"How Do Government Transfer Payments Affect Retail Prices and Welfare? Evidence from SNAP","authors":"Justin Leung, Hee Kwon Seo","doi":"10.2139/ssrn.3036713","DOIUrl":"https://doi.org/10.2139/ssrn.3036713","url":null,"abstract":"The Supplemental Nutrition Assistance Program (SNAP) pays for around 15% ($70 billion) of US food-store consumption each year. We assess the impact of SNAP disbursements on real consumption over the Great Recession and the ensuing decade. We document the payment formula as specified in government computer codes used to audit SNAP, and use the codes to simulate how the payments would have evolved had recipient characteristics remained fixed at pre-specified levels. Using national scanner data available since 2006 and the simulated instrument, we estimate that a 1% increase in SNAP benefits per population led to a persistent 0.08% increase in grocery prices. We verify long and flat pre-trends, sharp timing, and stronger effects in counties where the recipient share of the population is larger. Estimates of marginal propensities to consume food (MPCF) support past findings. We develop and calibrate a partial equilibrium model, both to test the consistency of the findings with theory and to interpret the results. A marginal dollar of benefits raises the recipient’s consumer surplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAP consumer’s surplus by $0.06, because of the large MPCF out of SNAP, low elasticities of demand, and market power. If the objective of SNAP is to guarantee the intended floor of real spending power on food, federal maximum benefits should be increased by 10% to account for the price response.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"177 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115224927","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}
There are more than 7,000 known rare diseases, but pharmaceutical manufacturers developed treatments for only 500 of them. To improve the availability and accessibility of treatments for rare diseases, governments have introduced several programs including subsidies, exogenous pricing, and outcome-based payment schemes in recent years. What kind of subsidy programs and pricing mechanisms can improve patient access? Inspired by various pilot programs, we present a multistage game theoretic model to analyze different subsidy schemes proposed for rare diseases. In addition to the traditional setting in which the manufacturer sets the price, we consider an “exogenous pricing scheme” under which an independent consortium sets the price. We also examine an outcome-based payment scheme, which offers the drug for free if it is not efficacious. We formulate a four-stage Stackelberg game to determine whether it is optimal to subsidize the pharmaceutical manufacturer, the patients, or both. Our results offer several insights. First, we find that government subsidies are crucial to entice new drug development for rare diseases. Also, we find that the pricing scheme matters: The exogenous pricing scheme can improve patient welfare, but it reduces the manufacturer’s expected profit. We find that this result is robust even when an outcome-based payment scheme is used. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was supported by the Dutch Science Foundation [Nederlandse Organisatie voor Wetenschappelijk Onderzoek VENI Talent Scheme]. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2022.4634 .
已知的罕见病有7000多种，但制药商只开发了其中500种的治疗方法。近年来，为了提高罕见病治疗的可得性和可及性，各国政府推出了包括补贴、外生定价和基于结果的支付方案在内的若干方案。什么样的补贴计划和定价机制可以改善患者获得治疗的机会?在不同的试点项目的启发下，我们提出了一个多阶段博弈论模型来分析不同的罕见病补贴方案。除了制造商设定价格的传统设定之外，我们还考虑了一种“外生定价方案”，即由独立的财团设定价格。我们还研究了一种基于结果的支付方案，如果药物无效，则免费提供药物。我们制定了一个四阶段的Stackelberg博弈来确定是否补贴制药商、患者或两者都是最优的。我们的研究结果提供了一些见解。首先，我们发现政府补贴对于吸引罕见病新药开发至关重要。此外，我们发现定价方案的影响:外生定价方案可以提高患者的福利，但降低了制造商的期望利润。我们发现，即使使用基于结果的支付方案，这个结果也是稳健的。这篇论文被运营管理的Jayashankar Swaminathan接受。资助:本研究由荷兰科学基金会[Nederlandse Organisatie voor Wetenschappelijk Onderzoek VENI Talent Scheme]资助。补充材料:数据文件和在线附录可在https://doi.org/10.1287/mnsc.2022.4634上获得。
{"title":"Improving Access to Rare Disease Treatments: Subsidy, Pricing, and Payment Schemes","authors":"W. Olsder, Tugce G. Martagan, Christopher S. Tang","doi":"10.2139/ssrn.3481150","DOIUrl":"https://doi.org/10.2139/ssrn.3481150","url":null,"abstract":"There are more than 7,000 known rare diseases, but pharmaceutical manufacturers developed treatments for only 500 of them. To improve the availability and accessibility of treatments for rare diseases, governments have introduced several programs including subsidies, exogenous pricing, and outcome-based payment schemes in recent years. What kind of subsidy programs and pricing mechanisms can improve patient access? Inspired by various pilot programs, we present a multistage game theoretic model to analyze different subsidy schemes proposed for rare diseases. In addition to the traditional setting in which the manufacturer sets the price, we consider an “exogenous pricing scheme” under which an independent consortium sets the price. We also examine an outcome-based payment scheme, which offers the drug for free if it is not efficacious. We formulate a four-stage Stackelberg game to determine whether it is optimal to subsidize the pharmaceutical manufacturer, the patients, or both. Our results offer several insights. First, we find that government subsidies are crucial to entice new drug development for rare diseases. Also, we find that the pricing scheme matters: The exogenous pricing scheme can improve patient welfare, but it reduces the manufacturer’s expected profit. We find that this result is robust even when an outcome-based payment scheme is used. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was supported by the Dutch Science Foundation [Nederlandse Organisatie voor Wetenschappelijk Onderzoek VENI Talent Scheme]. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2022.4634 .","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122435388","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}
A recent rapid-automation movement has been displacing routine labor and has sparked a series of discussion about taxation on automation such as a robot tax. However, the government's dilemma is that the planner may want to tax such physical capital that displaces routine labor--for example, industrial robots--for redistributive motives but does not want to tax other physical capital that increases such workers' productivities for instance, collaborative robots (cobots). This paper studies a novel setting of the optimal capital taxation on physical capital in which there is asymmetric information on both labor types and capital types between the planner and market. In particular, my model focuses on a two-by-two scenario where there are two types of labor (routine and non-routine labor) and two types of capital (displacing and reinstating capital). Despite asymmetric information, I find that the optimal uniform capital tax rate over different types of capital is strictly positive, as long as the solution is interior.
{"title":"Optimal Uniform Capital Taxation in a Partially Automated Society","authors":"Hideto Koizumi","doi":"10.2139/ssrn.3486827","DOIUrl":"https://doi.org/10.2139/ssrn.3486827","url":null,"abstract":"A recent rapid-automation movement has been displacing routine labor and has sparked a series of discussion about taxation on automation such as a robot tax. However, the government's dilemma is that the planner may want to tax such physical capital that displaces routine labor--for example, industrial robots--for redistributive motives but does not want to tax other physical capital that increases such workers' productivities for instance, collaborative robots (cobots). This paper studies a novel setting of the optimal capital taxation on physical capital in which there is asymmetric information on both labor types and capital types between the planner and market. In particular, my model focuses on a two-by-two scenario where there are two types of labor (routine and non-routine labor) and two types of capital (displacing and reinstating capital). Despite asymmetric information, I find that the optimal uniform capital tax rate over different types of capital is strictly positive, as long as the solution is interior.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131888105","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}
We study the problem facing the operator of a lottery who is charged with raising revenue for the public finances. Demand for the lottery is a function of both disposable income and the pricing of the game. Departing from the current literature, we show that optimal lottery pricing includes corrections for the degree of inequality and skewness in the income distribution and features of the function relating lottery spend to disposable income. When gross lottery expenditure is regressive, it is optimal for the operator to improve the terms of the game by being more generous with the proportion of spend that is returned to players. The opposite result holds when gross lottery expenditure is progressive. Using results from analysis of the U.K. National Lottery’s Saturday game between 1997 and 2013, we show that the effective price was about ten percentage points too low to be efficient, so that the operator was not fully exploiting its lottery power. However, we also show that, were it to have raised its price to improve efficiency, it would have increased inequality.
我们研究了负责为公共财政增加收入的彩票经营者所面临的问题。对彩票的需求是可支配收入和游戏定价的函数。从目前的文献出发，我们表明最优彩票定价包括对收入分配的不平等程度和偏度的修正，以及彩票支出与可支配收入相关的函数特征。当彩票总支出是递减的，对于运营商来说，通过更慷慨地将支出的比例返还给玩家来改善游戏条款是最优的。当彩票总支出是累进的时，结果正好相反。通过对1997年至2013年英国国家彩票公司(british National Lottery)周六彩票的分析结果，我们发现有效价格大约低了10个百分点，因此经营者没有充分利用其彩票权力。然而，我们也表明，如果为了提高效率而提高价格，就会加剧不平等。
{"title":"Do Lottery Operators Exploit Their Lottery Power? Efficiency and Equality Considerations in Optimal Lottery Design","authors":"M. Forster, E. Randon","doi":"10.2139/ssrn.3469549","DOIUrl":"https://doi.org/10.2139/ssrn.3469549","url":null,"abstract":"We study the problem facing the operator of a lottery who is charged with raising revenue for the public finances. Demand for the lottery is a function of both disposable income and the pricing of the game. Departing from the current literature, we show that optimal lottery pricing includes corrections for the degree of inequality and skewness in the income distribution and features of the function relating lottery spend to disposable income. When gross lottery expenditure is regressive, it is optimal for the operator to improve the terms of the game by being more generous with the proportion of spend that is returned to players. The opposite result holds when gross lottery expenditure is progressive. Using results from analysis of the U.K. National Lottery’s Saturday game between 1997 and 2013, we show that the effective price was about ten percentage points too low to be efficient, so that the operator was not fully exploiting its lottery power. However, we also show that, were it to have raised its price to improve efficiency, it would have increased inequality.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128168851","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}
Pub Date : 2019-09-30DOI: 10.32721/ctj.2019.67.3.fazel
A. Fazel
Suing the Canada Revenue Agency (CRA) in tort is a remedy available to taxpayers who have been subjected to an abusive tax audit. In this article, the author argues that in practice this is not much of a remedy. He first introduces the problem of abusive tax audits and gives an example of a case in which the taxpayers sued the CRA in tort for a failed criminal prosecution following an audit. The author then sets out the preliminary matters that taxpayers must consider before starting an action in tort against the CRA, examines the causes of action in tort that taxpayers have brought so far against the CRA, and discusses two recent judgments from Quebec (Canada's sole civil-law jurisdiction). He concludes with suggested solutions for Parliament to consider in addressing the shortcomings of the current system.
{"title":"Suing the Canada Revenue Agency in Tort","authors":"A. Fazel","doi":"10.32721/ctj.2019.67.3.fazel","DOIUrl":"https://doi.org/10.32721/ctj.2019.67.3.fazel","url":null,"abstract":"Suing the Canada Revenue Agency (CRA) in tort is a remedy available to taxpayers who have been subjected to an abusive tax audit. In this article, the author argues that in practice this is not much of a remedy. He first introduces the problem of abusive tax audits and gives an example of a case in which the taxpayers sued the CRA in tort for a failed criminal prosecution following an audit. The author then sets out the preliminary matters that taxpayers must consider before starting an action in tort against the CRA, examines the causes of action in tort that taxpayers have brought so far against the CRA, and discusses two recent judgments from Quebec (Canada's sole civil-law jurisdiction). He concludes with suggested solutions for Parliament to consider in addressing the shortcomings of the current system.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"71 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125693316","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}
The international tax system faces substantial challenges with respect to taxing profits of multinational enterprises. Policymakers have put the focus on the taxation of the digital economy. The aim of this article is to provide a comprehensive overview over the ALP and the allocation of taxing rights of business profits, the concept of value creation, the impact of digitization on the allocation of taxing rights and the current discussions regarding this topic. Finally, I make a connection between the value creation concept and the challenges of digitization and asked the question if ALP is fit for purpose. It is intended to refocus on the proper application of the ALP in the 21st century as the re-thinking exercise is more demanding and requires more work than what has been published so far. By doing this exercise, I also provide food for thought which could be further explored to enhance the current international tax system.
{"title":"The Arm’s Length Principle in the 21st Century – Alive and Kicking?","authors":"Stefan Greil","doi":"10.2139/ssrn.3379092","DOIUrl":"https://doi.org/10.2139/ssrn.3379092","url":null,"abstract":"The international tax system faces substantial challenges with respect to taxing profits of multinational enterprises. Policymakers have put the focus on the taxation of the digital economy. The aim of this article is to provide a comprehensive overview over the ALP and the allocation of taxing rights of business profits, the concept of value creation, the impact of digitization on the allocation of taxing rights and the current discussions regarding this topic. Finally, I make a connection between the value creation concept and the challenges of digitization and asked the question if ALP is fit for purpose. It is intended to refocus on the proper application of the ALP in the 21st century as the re-thinking exercise is more demanding and requires more work than what has been published so far. By doing this exercise, I also provide food for thought which could be further explored to enhance the current international tax system.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124100239","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}
Governments often subsidize startups with the goal of spurring entrepreneurship using tax incentives. Exploiting the staggered implementation of angel investor tax credits in 31 U.S. states from 1988 to 2018, we find that these programs increase the number of angel investments and average investment size. However, additional investments flow to lower-quality startups that are launched by less experienced entrepreneurs. Despite short-run propping up due to tax credits, angel-backed firms subsequently perform poorly. We find evidence that entry of new inexperienced investors can explain these results. Overall, our findings suggest that state-level investor tax credits are ineffective in promoting high-quality entrepreneurship.
{"title":"Financing Entrepreneurship: Tax Incentives for Early-Stage Investors","authors":"M. Denes, Xinxin Wang, Ting Xu","doi":"10.2139/ssrn.3454633","DOIUrl":"https://doi.org/10.2139/ssrn.3454633","url":null,"abstract":"Governments often subsidize startups with the goal of spurring entrepreneurship using tax incentives. Exploiting the staggered implementation of angel investor tax credits in 31 U.S. states from 1988 to 2018, we find that these programs increase the number of angel investments and average investment size. However, additional investments flow to lower-quality startups that are launched by less experienced entrepreneurs. Despite short-run propping up due to tax credits, angel-backed firms subsequently perform poorly. We find evidence that entry of new inexperienced investors can explain these results. Overall, our findings suggest that state-level investor tax credits are ineffective in promoting high-quality entrepreneurship.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"412 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126688559","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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