Thesis--University of California, Berkeley. / Includes bibliographical references (leaves 558-563). Also issued in print.

Thesis--University of California, Berkeley. / eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references (leaves 558-563).

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Since 1926, Congress has granted substantial tax benefits to encourage U.S. citizens to accept employment positions abroad so that they might, in turn, support the export of U.S. goods and services. The purpose of this study was to determine whether changes in the taxation of foreign earned income have any effect on the presence of American employees in foreign countries. The results of prior studies disagree on whether the U.S. income tax law may be used as an incentive to encourage Americans to work abroad. The present research addressed this issue once more using an ex post facto analysis of changes in American employment abroad following two recent tax law changes--the Tax Reform Act (TRA) of 1976 and the Foreign Earned Income Act (FEIA) of 1978. Since employment data for Americans working abroad are not available, the annual number of passports issued to individuals traveling for business purposes was selected as a suitable surrogate. The first hypothesis tested was that American employment declined subsequent to the TRA. This hypothesis was divided into four sub-hypotheses, three of which were supported by the ensuing analysis. Therefore, it was concluded that American employment did decline as a result of the TRA. The second hypothesis stated that American employment abroad changed subsequent to the FEIA. This hypothesis was divided into two sub-hypotheses. The analysis supported both sub-hypotheses indicating that the presence of American workers abroad increased as a result of the FEIA. The third hypothesis also centered around the FEIA. Since the provisions of this act granted larger tax deductions to American employees residing in high-cost countries relative to those residing in low-cost countries, it was hypothesized that American employment in high-cost countries increased more than did American employment in low-cost countries subsequent to the FEIA. This hypothesis was divided into two sub-hypotheses, only one of which was supported by the analysis. No conclusion could be reached regarding hypothesis three. The overall conclusion of the study was that changes in U.S. income tax laws do affect the decisions of U.S. citizens to accept employment decisions abroad. / Ph. D.

This thesis is the result of analysis conducted on the income tax systems of thirty-one states and supported a recommendation for a Texas income tax act.

This research examines how experience and missing information affect judgments of tax return preparers. Tax return preparers may often be faced with the problem of incomplete information, and their responses to this problem may be conditioned by whether or not they recognize information is missing. Based on the Holland et al.'s cognitive theory of induction as applied to tax judgment by Marchant et al., it was hypothesized that experienced tax preparers would correctly classify more items as to their relevance to a specific tax issue than novice tax preparers. Additionally, it was hypothesized that the strength of recommendations of tax preparers who had no relevant information missing would be greater than the strength of recommendations of tax preparers who had relevant information missing and were prompted that information was missing. Lastly, it was hypothesized that prompting that relevant information was missing would have a greater effect on the strength of recommendations of tax return preparers with lesser specific experience than it would on the strength of recommendations of tax return preparers with greater specific experience. The results suggest that experienced tax preparers do recognize the relevance of information to a greater degree than novice tax preparers. There was no significant difference, however, in the strengths of recommendation of tax preparers who had no missing information and those who were prompted that information was missing. There was a significant difference in the strengths of recommendations of tax preparers with lesser specific experience who had been prompted that relevant information was missing and those who had not been prompted that relevant information was missing. Among tax preparers with greater specific experience, however, there was no significant difference between the two groups. These results suggest that tax preparers with greater specific experience recognized that relevant information was missing without being prompted, while tax return preparers with lesser specific experience did not.

M.S.

Inflation, especially recently, has distorted the nominal historical-cost measurement of gains and losses from transactions in assets. This distortion has exacerbated the existing controversy over the federal taxation of such gains and losses realized by individuals. The main purpose of the study was to examine the equity of actual and proposed methods respecting such taxation in view of these inflation distortions. Particularly, the study investigated how the applicable law, as it was in the immediate past (1977 Law), as it is now (1979 Law), and as many have proposed that it should be (the Reform Plan), compared under the traditional ability-to-pay theory of equity. The Reform Plan combines two current and popular tax reform proposals, the comprehensive income tax and indexing. As it was interpreted and applied in this study, gains and losses from transactions in assets were fully included in income, after they were indexed for inflation. Indexing consists of multiplying the historical cost of an asset by the ratio of some price index (herein the CPI) at the time of disposition to the index at the time of acquisition. Subtracting the result from the disposition price gives a gain or loss measured in real, inflation-adjusted terms. The comparisons of the three taxing methods were based upon historical tax-return data of 224 individual taxpayers for 1970-1977. The non-random manner in which the taxpayers were selected precludes the results and conclusions of the study from being statistically extended to the population of U.S. taxpayers. Significantly, however, the tax characteristics of the selected taxpayers indicated that they were more sensitive to effects of inflation than their national counterparts. Provisions of 1979 Law and the Reform Plan were simulated on the historical data, resulting in recomputed incomes and tax liabilities. The historical and recomputed incomes and taxes were then averaged by taxpayer over the eight years. These averages gave better approximations of the normal financial status of the taxpayers than single-year data. Data generated in the Reform Plan simulation indicated that the selected taxpayers' historical gains and losses were substantially distorted by inflation. Moreover, the proportional effects of inflation decreased as taxpayers' income increased. These findings were fully consistent with two published studies. Various procedures measured and compared the horizontal equities and vertical equities (progressivities) of the three disparite taxing methods. None of them exhibited any clear, unambiguous superior ratings. The Reform Plan was only slightly more horizontally equitable and only slightly more progressive than 1977 Law; 1979 Law ranked last in both analyses, but by small margins. Importantly, under all three methods, progressivity was maintained at higher income levels, but only when income was defined in real terms. When income was defined in nominal terms, a marked decrease in progressivity was manifested. This finding suggests that the appearance at these levels of reduced progressivity, and hence of reduced vertical equity, may be an illusion. Given the above findings, perhaps too much historical emphasis has been placed on the equity benchmark in evaluating the taxation of individuals' gains and losses from transactions in assets. If so, then other judgmental criteria would seem to take on relatively greater importance. Four such criteria deemed pertinent were neutrality, simplicity, mitigation of the "lock-in effect" and stimulation of capital information. The Reform Plan appeared to be more neutral than either 1977 or 1979 Law. Whether it is simpler is questionable. Probably less unrealized gains would be locked-in under the Reform Plan. However, with respect to capital formation, considerable theoretical disagreement precluded a conclusion as to which taxing method would be more stimulative.

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