Browsing by Author "Alm, James"

Now showing 1 - 4 of 4

Open Access
Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods
(Te Herenga Waka—Victoria University of Wellington, 2017) Adhikari, Bibek; Alm, James
Tax reforms are often motivated by their potential to improve economic performance. However,their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the 8 Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post-reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time-varying impact of unobservable heterogeneity. We find positive impacts in all 8 countries, with 7 out of 8 cases significant at the conventional level.
Open Access
Is Economics Useful for Public Policy?
(Te Herenga Waka—Victoria University of Wellington, 2018) Alm, James
Economists have always played an important role in major public policy debates. Even so, I believe that the role of economists in these public policy discussions has often been misguided because it has typically relied upon “best practices,” stated in the form of “general guidelines” or even “universal principles.” However, “best practices” are not best if the specific situation does not conform with the assumptions that underlie the advice. So my first conclusion is a cautionary, and negative, one: Specific circumstances differ so profoundly across individuals, firms, markets, countries, and time that most any attempt to define “best practices” that apply in all circumstances will lead to profoundly misleading public policy recommendations. However, even if economics cannot identify “the” truth, it can often identify “a” truth. So my second conclusion is a more positive one: Economists should continue to develop multiple theories that inform public policies, but we should also focus our efforts on identifying and testing the critical assumptions that drive the results of these theories, recognizing that the validity of any assumptions will depend intimately on specific circumstances. I illustrate these two main conclusions with specific examples from my own work. I conclude with some “best practices” recommendations of my own, recognizing the obvious irony of such an effort.
Open Access
Property Tax Delinquency - Social Contract in Crisis: The Case of Detroit
(Te Herenga Waka—Victoria University of Wellington, 2014) Alm, James; Hodge, Timothy R.; Sands, Gary; Skidmore, Mark
In this paper we develop a theoretical model of the individual decision to become delinquent on one’s property tax payments. We then apply the model to the City of Detroit, Michigan, USA, where the city is in the midst of bankruptcy proceedings, and a rate of property tax delinquency of 48 percent, resulting in uncollected tax revenues of about 20 percent. We use detailed parcellevel data for Detroit to evaluate the factors that affect both the probability that a property owner is tax delinquent and, conditional upon delinquency, the magnitude of the delinquency. Our estimates show that properties that have lower value, longer police response times, are nonhomestead (non-owner occupied residential properties), have a higher statutory tax rate, have a higher assessed value relative to sales price, are owned by a financial institution or by a Detroit resident, are delinquent on water bills, and for which the probability of enforcement is low are more likely to be tax delinquent These findings can be used to inform policies targeted at improving tax compliance within the City.
Open Access
When You Know Your Neighbour Pays Taxes: Information, Peer Effects, and Tax Compliance
(Te Herenga Waka—Victoria University of Wellington, 2017) Alm, James; Bloomquist, Kim M.; McKee, Michael
In this paper, we suggest that individuals’ tax compliance behaviours are affected by the behaviour of their “neighbours”, or those about whom they may have information, whom they may know, or with whom they may interact on a regular basis. Individuals are more likely to file and to report their taxes when they believe that other individuals are also filing and reporting their taxes; conversely, when individuals believe that others are cheating on their taxes, they may well become cheaters themselves. We use experimental methods to test the role of such information about peer effects on compliance behaviour. In one treatment setting, we inform individuals about the frequency that their neighbours submit a tax return. In a second treatment setting, we inform them about the number of their neighbours who are audited, together with the penalties that they pay. In both cases, we examine the impact of information on filing behaviour and also on subsequent reporting behaviour. We find that providing information on whether one’s neighbours are filing returns and/or reporting income has a statistically significant and economically large impact on individual filing and reporting decisions. However, this “neighbour” information does not always improve compliance, depending on the exact content of the information.