In “Hawaii General Excise Tax (GET): Should the Base be Changed?”, William Fox analyses whether Hawaii GET should be altered by granting additional exemptions and by eliminating some existing exemptions.
This matter should be carefully considered because GET generates the largest amount of revenue at a low tax rate in Hawaii. In addition, Hawaii has the broadest sales tax base in the US.
Any appropriate exemption should be evaluated in the light of economic, revenue, and distributional effects. Business to business transactions as well as business to household transactions can both benefit from tax exemptions. While assessing exemptions it is also crucial to understand the difference between business and individual behavior.
Regardless of exemptions, every good tax system is comprised of low compliance and administrative costs. Compliance refers to the costs on the private sector to fill out tax returns, comply with tax structures, and remit tax payments. Administrative costs are about the government costs on collecting taxes, hiring staff, designing tax systems, preparation of documents, and identification of tax payers.
Independently of tax exemptions, another important aspect to be considered are the revenue principles of sufficiency, adequacy, and stability. Sufficiency means the generation of required revenues during budget periods. Adequacy is about whether tax systems provide enough revenues to continue providing services over the long term. And stability refers to taxpayer’s cyclical performance.
terça-feira, 29 de março de 2011
Incorporating Risk in Revenue Forecasting
In “Fiscal Planning, Budgeting, and Re-Budgeting Using Revenue Semaphores” Cornia, Nelson, and Wilko affirm that risk and uncertainty measures should be incorporated into budgeting process to improve real-time budgeting and reduce adverse effects.
To make revenue forecast more accurate, they argue that methodological innovations and software development should be considered while projecting revenues.
The case studied is the budgeting planning process of the state of Utah.
To make revenue forecast more accurate, they argue that methodological innovations and software development should be considered while projecting revenues.
The case studied is the budgeting planning process of the state of Utah.
Revenue Forecasting
In “Betting on the Future with a Cloudy Crystal Ball” Thompson and Gates talk about the challenges of revenue forecasting.
Economic growth is the main factor influencing revenue forecasting. As this indicator is always changing, it is impossible to determine revenue forecasts accurately. Therefore, budget specialists should be concerned about managing volatility by asking themselves the following question: “How can we get a good result no matter what the economy throws at us?”
Four tools contribute to this financial analysis: growth, portfolio, hedging, and consumption smoothing.
In terms of growth, it is essential to use the average of past revenue growth. For portfolio, it is important to understand the relation between taxes. As far as hedging is concerned, creating a revenue flow of equal size and opposite volatility consists of the cheapest and most direct way to address systematic changes. And regarding consumption smoothing, the use of borrowing and savings smooth out consumption over time.
Economic growth is the main factor influencing revenue forecasting. As this indicator is always changing, it is impossible to determine revenue forecasts accurately. Therefore, budget specialists should be concerned about managing volatility by asking themselves the following question: “How can we get a good result no matter what the economy throws at us?”
Four tools contribute to this financial analysis: growth, portfolio, hedging, and consumption smoothing.
In terms of growth, it is essential to use the average of past revenue growth. For portfolio, it is important to understand the relation between taxes. As far as hedging is concerned, creating a revenue flow of equal size and opposite volatility consists of the cheapest and most direct way to address systematic changes. And regarding consumption smoothing, the use of borrowing and savings smooth out consumption over time.
terça-feira, 15 de março de 2011
Principles of Tax Policy in Hawaii
"Report of the 2005-2007 Tax Review Commission" unfolds the principles of a sound tax policy in Hawaii.
The principles are:
i) fairness: people in similar economic circumstances are taxed equally and higher incomes should face a higher tax rate;
ii) efficiency: broaden tax scope so that tax rate can be kept low & uniformly apply to its base to avoid favoring one type of consumption over another;
iii) simplicity: eliminate special deductions, exemptions, and exclusions to reduce costs of tax compliance by taxpayers and tax administration by policymakers;
iv) transparency/accountability: allow taxpayers see which taxes they are paying, which taxes they wish to pay, and how much;
v) adequacy/stability: raise appropriate amount of revenue for the government service demanded by its citizens and provide the right amount of revenue as the economy grows;
vi) competitiveness: give tax incentives only to attract businesses that would not flourish in the natural economic environment.
The principles are:
i) fairness: people in similar economic circumstances are taxed equally and higher incomes should face a higher tax rate;
ii) efficiency: broaden tax scope so that tax rate can be kept low & uniformly apply to its base to avoid favoring one type of consumption over another;
iii) simplicity: eliminate special deductions, exemptions, and exclusions to reduce costs of tax compliance by taxpayers and tax administration by policymakers;
iv) transparency/accountability: allow taxpayers see which taxes they are paying, which taxes they wish to pay, and how much;
v) adequacy/stability: raise appropriate amount of revenue for the government service demanded by its citizens and provide the right amount of revenue as the economy grows;
vi) competitiveness: give tax incentives only to attract businesses that would not flourish in the natural economic environment.
Optimal Taxation
In "Optimal Taxation in Theory and Practice" Mankiw, WeinZierl, and Yagan deals with the optimal design of tax systems.
The eight lessons from tax theory for optimal taxation are:
1. Optimal marginal tax rate schedules (or tax list applied to income level) depend on the distribution of ability (talent: ability to earn);
2. Optimal marginal tax schedule could decline at high incomes;
3. A flat tax, with a universal lump-sum (single payment), could be close to optimal;
4. The optimal extent of redistribution (take money from someone and give to someone else) rises with wage inequality;
5. Taxes should depend on personal characteristics as well as income;
6. Only final good ought to be taxed, and typically they ought to be taxed uniformly;
7. Capital income ought to be untaxed, at least in expectation;
8. In stochastic (conjectural or random) dynamic economies, optimal tax policy requires increased sophistication.
The eight lessons from tax theory for optimal taxation are:
1. Optimal marginal tax rate schedules (or tax list applied to income level) depend on the distribution of ability (talent: ability to earn);
2. Optimal marginal tax schedule could decline at high incomes;
3. A flat tax, with a universal lump-sum (single payment), could be close to optimal;
4. The optimal extent of redistribution (take money from someone and give to someone else) rises with wage inequality;
5. Taxes should depend on personal characteristics as well as income;
6. Only final good ought to be taxed, and typically they ought to be taxed uniformly;
7. Capital income ought to be untaxed, at least in expectation;
8. In stochastic (conjectural or random) dynamic economies, optimal tax policy requires increased sophistication.
Social Spending and Economic Growth
In "Growing Public: Social Spending and Economic Growth" Peter Lindert argues in favor of welfare states and affirms that social transfers do not harm economic growth.
The first reason is "budget-stakes principles". This principle states that "the higher the budget, the higher the marginal cost of choosing the wrong fiscal design". The higher the negative impact of a wrong fiscal design, the higher the deadweight-cost (loss of economic efficiency).
The second reason is universalism. It is claimed that it is better to have broader and flatter taxes because they distort less economic signals & private behavior, are less costly to administer, and are fairer and more transparent. According to this principle, everyone is entitled to similar basic income support and services and a general sales tax (general excise tax, in Hawaii) should be applied uniformly to all products.
There are two choices about budget: size and fiscal design. The United States, for example, has opted out for a small budget and inefficient (with holes: exemptions, deductions, incentives, etc) whereas Sweden decided for a large budget and efficient (universal: flatter taxes).
The first reason is "budget-stakes principles". This principle states that "the higher the budget, the higher the marginal cost of choosing the wrong fiscal design". The higher the negative impact of a wrong fiscal design, the higher the deadweight-cost (loss of economic efficiency).
The second reason is universalism. It is claimed that it is better to have broader and flatter taxes because they distort less economic signals & private behavior, are less costly to administer, and are fairer and more transparent. According to this principle, everyone is entitled to similar basic income support and services and a general sales tax (general excise tax, in Hawaii) should be applied uniformly to all products.
There are two choices about budget: size and fiscal design. The United States, for example, has opted out for a small budget and inefficient (with holes: exemptions, deductions, incentives, etc) whereas Sweden decided for a large budget and efficient (universal: flatter taxes).
quinta-feira, 10 de março de 2011
Knowledge Management in the Public Sector
In “Issues of Knowledge Management (KM) in the Public Sector” Xiaoming Cong and Kaushik Pandya state that the public sector should learn from the private sector about the management tools, techniques, and philosophies of KM.
The main challenge faced by KM in the public sector is lack of awareness. Because public authorities ignore the benefits of KM in improving decision-making process, poor performance is constantly witnessed in public agencies.
Public agencies need not only to share more knowledge but also generate more. Knowledge is different than data because it derives from information after this being compared, logically related, and connected with other information.
Technology is an element of KM. While it connects, it does not motivate people to share or identify the gap between existing and needed knowledge. Public authorities have to build an environment of trust, develop leaders who foster sharing, and create a reward system. Once this context is set, then public managers can devote time to the essences of KM which are i) whom to share ii) what to share iii) how to share iv) sharing and v) using.
The main benefits of KM essences are i) create values that reduce time & expenses of trial and error ii) reduce cost of operation & improve customer service iii) treat people like a valuable asset iv) reduce re-work, and v) increase innovation & collaboration & efficiency & productivity & quality.
http://issuu.com/academic-conferences.org/docs/ejkm-volume1-issue2-article17
The main challenge faced by KM in the public sector is lack of awareness. Because public authorities ignore the benefits of KM in improving decision-making process, poor performance is constantly witnessed in public agencies.
Public agencies need not only to share more knowledge but also generate more. Knowledge is different than data because it derives from information after this being compared, logically related, and connected with other information.
Technology is an element of KM. While it connects, it does not motivate people to share or identify the gap between existing and needed knowledge. Public authorities have to build an environment of trust, develop leaders who foster sharing, and create a reward system. Once this context is set, then public managers can devote time to the essences of KM which are i) whom to share ii) what to share iii) how to share iv) sharing and v) using.
The main benefits of KM essences are i) create values that reduce time & expenses of trial and error ii) reduce cost of operation & improve customer service iii) treat people like a valuable asset iv) reduce re-work, and v) increase innovation & collaboration & efficiency & productivity & quality.
http://issuu.com/academic-conferences.org/docs/ejkm-volume1-issue2-article17
segunda-feira, 7 de março de 2011
The relations bewteen budget transparency and fiscal situation & political turnout
In “Budget Transparency, Fiscal Performance, and Political Turnout” Francisco Bastida assesses the relationships between i) budget transparency, ii) fiscal situation and iii) political turnout.
He identified positive relationships between budget transparency and fiscal balance & political turnout. The more information is disclosed, the less politicians use deficits for opportunistic goals and the more incentives people have to vote.
Chile is an example of these relationships.
He identified positive relationships between budget transparency and fiscal balance & political turnout. The more information is disclosed, the less politicians use deficits for opportunistic goals and the more incentives people have to vote.
Chile is an example of these relationships.
Adressing Local Fiscal Distress
In “Preventing Local Government Fiscal Crises” Charles Koe discusses the relation between the state and local governments over preventing fiscal emergencies.
The main reasons for fiscal distress are i) economic decline ii) tax base erosion iii) demographics change iv) federal & state mandates v) federal revenue cuts vi) state tax levy limits vii) recessions viii) mismanagement.
States help local governments prevent fiscal emergencies by i) monitoring local government finances ii) assisting local government in ameliorating fiscal problems (by i) providing technical assistance ii) loan iii) grants iv) backing of local government debt v) temporarily waiving state property tax limits) and iii) assistance notwithstanding (if situation becomes grave, require strong remedial measures like tax increase and expenditure cuts).
States should measure local fiscal condition by analyzing the operating budget and the annual financial report to detect fiscal condition at the beginning of fiscal year.
The main reasons for fiscal distress are i) economic decline ii) tax base erosion iii) demographics change iv) federal & state mandates v) federal revenue cuts vi) state tax levy limits vii) recessions viii) mismanagement.
States help local governments prevent fiscal emergencies by i) monitoring local government finances ii) assisting local government in ameliorating fiscal problems (by i) providing technical assistance ii) loan iii) grants iv) backing of local government debt v) temporarily waiving state property tax limits) and iii) assistance notwithstanding (if situation becomes grave, require strong remedial measures like tax increase and expenditure cuts).
States should measure local fiscal condition by analyzing the operating budget and the annual financial report to detect fiscal condition at the beginning of fiscal year.
Predicting Local Fiscal Distress
Khola, Weissert, and Kleine deal with the prediction of state financial difficulties in “Developing and Testing a Composite Model to Predict Local Fiscal Distress”.
The main reasons for local fiscal distress are i) population & job market shifts ii) governmental growth iii) interest groups demands and iv) poor management.
States can adopt a 10-point scale to detect local financial difficulties before they become serious. The components of this scale are i) population growth ii) real taxable value growth iii) large real taxable value decrease iv) general fund expenditure as a percentage of taxable value v) general fund operating deficit vi) prior general fund operating deficits vii) size of general fund balance viii) fund deficits in the current or previous year and ix) general long term debt as a percentage of taxable value.
The problems of this scale are i) too many variables ii) exclude key variables iii) ignore incentive problems iv) use relative rather than absolute measures v) use data that are not often readily available.
The main reasons for local fiscal distress are i) population & job market shifts ii) governmental growth iii) interest groups demands and iv) poor management.
States can adopt a 10-point scale to detect local financial difficulties before they become serious. The components of this scale are i) population growth ii) real taxable value growth iii) large real taxable value decrease iv) general fund expenditure as a percentage of taxable value v) general fund operating deficit vi) prior general fund operating deficits vii) size of general fund balance viii) fund deficits in the current or previous year and ix) general long term debt as a percentage of taxable value.
The problems of this scale are i) too many variables ii) exclude key variables iii) ignore incentive problems iv) use relative rather than absolute measures v) use data that are not often readily available.
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