15

I think it’s mainly politics. For example, when France tried to implement increases in tax on oil (indirect way of taxing carbon) it led to yellow jacket protest. As you pointed out it’s easy to track who produces the carbon in the economy. Especially on industrial level in developed countries. The reason 1 could be problem in some developing countries ...


10

It seems that there are many advantages to carbon taxes, including pricing in the environmental cost and generating revenue (that could offset other taxes). So why are we not seeing them in practice, at least not very much of them? We do, but not in an optimal way. I'm a forest owner. My forest sequesters about 40 tonnes of carbon dioxide every year. If I ...


9

Just to build up on @1muflon1's (+1) answer: I'd also add the "axe the tax" campaign in British Columbia back in 2008. The carbon tax there is (or at least was) considered a model example of how to implement revenue neutral carbon tax. Despite catchy slogans, the ruling party survived the election and so did the carbon tax. However, it brings us to the ...


4

$$ \frac{\partial\frac{T(Y)}{Y}}{\partial Y}= \frac{T'(Y)}{Y} - \frac{T(Y)}{Y^2} $$ This can only be smaller than 0 if $$ T'(Y) < \frac{T(Y)}{Y} $$ In other words, the marginal tax rate needs to be smaller than the average tax rate. This can't happen because you start with an average tax rate of zero and a positive marginal tax rate. From then on, in ...


3

There are sometimes cases where protectionist trade policies are a good thing. (note this is a big debate, so a bit of bias here). Lets look at an example to make it clear... Suppose I'm country A and you are country B. I'm a small country, you are a large one. My country is 100% agriculture based. Your country is completely diverse and strong in all ...


3

There is nothing to prevent other countries "taking advantage" of an export market's UBI. However, I don't think that that implies a country introducing a UBI would need to increase tariffs, and I have never heard this being advocated. Since UBI hasn't been implemented on a large scale, there is little compelling evidence on what its effects will be, but a ...


2

Why not use a smoothly changing incremental rate? "A steady curve" First, as it has been clarified that the bracket changes are on incremental income then there are no major discontinuities in the average rate even though there may be in the marginal rate. So one might put the question in reverse: why would you have smoothly changing marginal rates? There ...


2

The marginal tax rate is supposed to reflect incentives for the individual. In order to derive a meaningful metric, the calculation should hence try to reflect the actual decision an individual is facing. An increase in \$1 pay is probably not something people are considering. If, however, someone earning \$10 per hour considers to increase his/her labor ...


2

It’s true that inheritance tax could pose a problem for businesses. The reason for that is that even though you are correct to say that the successor to businesses owner (I would avoid word patriarch - many business owners are women) has option of selling equity stake or take a loan this can be sub-optimal or difficult. For example, selling equity in ...


2

I think the big unknown here is how much they'll start to dissimulate and/or offshore their (new) wealth. According to one paper: A recent study by Brülhart et al. (2017) gives support to the plausible assumption that the effect of net wealth taxes on reported wealth is the more pronounced the more integrated the regions involved are. According to ...


2

In the UK, government spending is 38.5 per cent of GDP. To oversimplify, that means that for every £1 spent on private goods, 63p needs to be raised in taxes. At present, the UK raises a little over a quarter of that from income tax. One of the reasons income tax is a significant component is that it is progressive, unlike other major sources such as VAT ...


2

A lump sum tax is a tax which only has an income effect, it has the equivalent effect of reducing the agent's wealth. In particular, it has no substitution effect, it does not incentivise the agent to switch between $c$ and $l$. In your case the agent's optimal choice of $c$ and $l$ is given by: $(c^*,l^*)=\left(\frac{w(1-t)}{1+w(1-t)},\frac{w(1-t)}{1+w(1-t)...


2

In comments it was clarified that $T(Y) = 0$ and continuity are not assumed. In this case there are several counterexamples, a relatively simple one being $$ T(Y) = \left\{ \begin{array}{ll} 1 + 20\%Y & \text{if } Y \leq 5 \\ 40\% Y & \text{if } Y > 5. \end{array} \right. $$ Here the taxation is progressive, but the average tax rate $T(Y)/Y$ is ...


2

In your comment you say you want the answer in context of the classic textbook model for goods market/output equilibrium. Following the Blanchard macroeconomics textbook lets consider closed economy so the output will be given by: $$Y=C+I+G$$ where $Y$ is output/income (they must be always equal), $C$ consumption, $I$ investment and $G$ gov. spending. ...


1

Germany is introducing a carbon tax. It will start at €25/ton in 2021 and increase to €55/ton in 2025. Although many argue that this is too little, too late, others are saying that it will start to have an effect on consumption from around €30/ton (I read this figure in an offline newspaper this morning, can add a quote when I get home). In an earlier ...


1

The structure of the tax ladder is such that the marginal tax rates keep increasing. The upshot is that if you earn more, your net earning (after taxes) will never be lower. So a company with a good year will always be better off compared to a company with a bad year, holding everything else equal. In this sense, tax does not provide advantage to companies ...


1

Presumably the $\$325K$ represents the sale of the equipment. It is positive while the purchase of the equipment was shown as $-\$6,000K$ The question says $\$500K$, but that there has been depreciation down to zero (also shown in the table five times as $\$1200K$) The depreciation has led to lower taxes being paid, so tax at a rate of $35\%$ is due on ...


1

There is something called productive consumption. The coal and the iron a steelmill consumes are productive consumption, as steel cannot be produced without consumption of coal and iron. Plus, the bread and cloth workers for the steelmill consume are also productive consumption, as the workers would not be able to work without eating and dressing. ...


1

On your assumption "I assume that investing is more useful than consuming for society as a whole, at least in the long run." This is not necessarily true. Imagine if all factories were geared towards investment. There would be a lot of heavy industry, to pour concrete, cast steel and make intricate machinery but all of it would go to build new factories. ...


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