eCommons

 

Essays on Public Finance and Development

Other Titles

Author(s)

Abstract

This dissertation studies fiscal policy, specifically the efficiency and electoral constraints on tax policy, and the measurement of public sector health to increase the effectiveness of government spending. Chapter 1 studies high-income taxpayer responses through the tax base channel to changes in marginal income tax rates in the United States. Prior research that has used bunching methods to estimate the taxable income response of high earners has presented no evidence of bunching at the top kink in the regular, federal income tax schedule. I argue that at the federal level, a combination of the regular and Alternative Minimum Tax schedules identifies the actual tax-related incentives that apply to high earners. I use annual income tax codes and publicly available samples of Internal Revenue Service individual income tax return data from 1993-2011 to characterize the combined schedule for each taxpayer. I discover previously undetected bunching at the top kink in this schedule and use it to estimate the elasticity of taxable income with respect to the net-of-tax rate for high earners to be between 0.15 to 0.28. This implies an upper bound on the efficiency cost of income taxation of 45 cents to a dollar, and a lower bound on the optimal top marginal tax rate of 70 percent, suggesting an optimal rate that is higher than prevailing top rates. I also mitigate an emerging endogeneity concern with bunching estimators that use kink points fixed in taxable income. By using effective top kinks that vary across taxable income for each taxpayer, I separate variation in marginal tax rates from variation in taxable income, making my bunching estimates more methodologically robust than earlier estimates. Chapter 2 estimates the impact of tax reforms on citizens’ voting behavior. We examine the effect of changing income tax burdens on voting behavior in presidential and House elections across the United States. To do so, we use a novel simulated instrumental variable approach in conjunction with survey, administrative, and voting data for the years 2010 to 2020 to isolate changes in tax burdens that arise purely due to variation in tax policy from changes caused by demographic shifts. We estimate that an increase in tax burdens by about half a standard deviation increases the vote share for the Republican party by one to six percentage points. This relationship is strongest, both statistically and in terms of magnitude, for presidential elections. For House elections, we find suggestive, but not definitive evidence that this relationship holds. Our analysis shows that contrary to popular belief, taxpayers continue to vote in their economic self-interest. In Chapter 3, I develop a tool for measuring the multidimensional performance of the public sector in the spirit of multidimensional measures of poverty. The framework allows fiscally constrained policymakers to measure a sector’s resource base, assess it over time, and optimize spending. The measure's decompositional properties provide for easy identification of the sources of deprivation along various dimensions and across subgroups, such as geographical areas and subsectors. In an application to the public education sector in Sindh province, Pakistan, I show that 27 percent of public schools are multidimensionally deprived and the weakest dimensions are physical infrastructure and facilities. Single-sex, rural schools, where instruction is in the native Sindhi language contribute the most to the overall measurement of sectoral weakness.

Journal / Series

Volume & Issue

Description

187 pages

Sponsorship

Date Issued

2021-08

Publisher

Keywords

Economics; Elasticity of taxable income; Multidimensional measurement; Public finance; Tax policy; Voting behavior

Location

Effective Date

Expiration Date

Sector

Employer

Union

Union Local

NAICS

Number of Workers

Committee Chair

Chau, Nancy

Committee Co-Chair

Committee Member

Lovenheim, Michael F.
Kanbur, Ravi

Degree Discipline

Applied Economics and Management

Degree Name

Ph. D., Applied Economics and Management

Degree Level

Doctor of Philosophy

Related Version

Related DOI

Related To

Related Part

Based on Related Item

Has Other Format(s)

Part of Related Item

Related To

Related Publication(s)

Link(s) to Related Publication(s)

References

Link(s) to Reference(s)

Previously Published As

Government Document

ISBN

ISMN

ISSN

Other Identifiers

Rights

Attribution-NonCommercial-NoDerivatives 4.0 International

Types

dissertation or thesis

Accessibility Feature

Accessibility Hazard

Accessibility Summary

Link(s) to Catalog Record