Reflections on the Tax Working Group Report
This article reviews the Report of the Tax Working Group of the Victoria University of Wellington, which included individuals from the Treasury and the Inland Revenue Department, as well as from the business community. The Report makes an important contribution to the tax policy debate in New Zealand by setting out the reasons for reform, the basic principles used to consider alternative policies, and the advantages and disadvantages of a range of reform proposals. The purpose of this review of the Report is not to discuss the proposals and recommendations in detail, but to consider a number of aspects concerning the evaluation of tax structures and to try to clarify some arguments which are not stated explicitly in the Report. An indication of useful next steps is also given.
The Excess Burden of Taxation
No abstract available.
Integrating Expenditure and Tax Decisions: The Marginal Cost of Funds and the Marginal Benefit of Projects
This paper seeks to clarify the extent to which the rule for providing public goods ought to correct for the distortionary cost of raising funds. We argue that, in evaluating public projects, the marginal cost of funds (MCF) concept must be supplemented by a symmetrical concept, which we label the marginal benefit of public projects, or MBP, which indicates the value to individuals of the dollars spent. Each of these concepts can be decomposed into two separate components, one reflecting efficiency and the other characterizing the distributional impact of the project itself or its financing. We conclude that efficiency of the financing cannot be ignored, that distributional considerations are also relevant, and that the availability and optimality of tax instruments is critical for evaluating the appropriateness of proceeding with a public good-cum financing project. However, one can construct special cases, as in Kaplow (1996), where the simple cost-benefit criterion applies.