Tax uncertainty is often claimed to be harmful for investments. Capital taxes, such as property and wealth taxes, are particularly exposed to tax uncertainty. Capital tax un- certainty emerges from expected tax reforms, the unclear outcome of future tax audits, and simplified estimates of capital tax bases in investment models. Uncertain returns on investment as well as stochastic taxation contribute to overall uncertainty and may significantly affect investment decisions. Hitherto, it is unknown how capital tax uncertainty affects investment timing. However, it is well known that both uncertainty and capital tax may be harmful for investment and decelerate investment activities. We are the first to study the investment timing effects of stochastic capital taxes in a real options setting with risky investment opportunities. Our results indicate that even risk neutral investors are sensitive with respect to capital tax risk and may react in a surprising manner to a newly introduced stochastic capital tax. As an apparently paradoxical investment e¤ect, we find that increased capital tax uncertainty can accelerate risky investment if such uncertainty is such ciently low compared to cash flow uncertainty. In contrast, high capital tax risk delays high-risk innovative investment projects. To reduce unintended consequences of uncertain tax policy, tax legislators and tax authorities should avoid high levels of cap- ital tax uncertainty. Broadening the capital tax base or increasing the capital tax rate induces ambiguous timing effects. Furthermore, high-growth investments are likely to be postponed if they experience a capital tax cut. Since investment reactions upon tax reforms are well-known to affect income and wealth distribution, reliable estimations of the impact of taxes on economic decisions are necessary. (authors' abstract) / Series: WU International Taxation Research Paper Series

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隨著人類的經濟活動發展造成環境的污染，近年來，人們開始注重環境的保護，並試著在經濟發展和環境保護之間取得平衡，本文便以此想法結合地區之間的租稅競爭，進而研究地方政府之間在環境政策的競爭是否會造成環境品質的向下沉淪 (race to the bottom)。本文中的地方政府利用對製造污染的廠商課徵資本稅(本文以從量稅和從價稅為例，但資本稅稅率為外生條件)以做為公共財的財源，同時管制廠商所排放的污染量。 本文主要得到了三個結論：(1) 地方政府之間競爭的結果將會造成環境政策的向下沉淪；(2) 在單位稅額相同的情況下，地方政府選擇以從量稅或從價稅課徵資本稅，並不影響環境政策向下沉淪的程度，以及 (3) 影響環境政策向下沉淪的因素主要取決於該地方政府面臨的競爭對手數量，競爭的轄區愈多，環境政策向下沉淪的程度愈甚。 / As the development of economy, the environment becomes much polluted. In recent years, environment protection has become an important issue, and people have tried to strike a balance between the development of economy and environment protection. In this thesis, we combine this idea and tax competition among jurisdictions, and discuss the issue that whether the tax competition among jurisdictions leads to “the race of bottom.” In this environmental quality, the local governments levy tax on the capital of polluting industries, with either unit tax or ad valorem tax and with fixed tax rate, and use the tax revenues to finance public goods. Each government also imposes a cap on firms’ emissions. I obtain three main results: (1) The competition between local governments will lead to the race to the bottom in environment policy. (2) Given the same revenue per unit of tax, both the unit tax and the ad valorem tax lead to the same environmental policy. (3) The level of race to the bottom in environment policy depends on the number of the competitors to the local government. As the number of jurisdictions increases, the more the level of race to the bottom in the environment policy. Key words: environment policy, capital tax, tax competition

The focus of my research is dynamic political economy in macroeconomics. The first chapter of my dissertation studies the fact that Countries in the Organization of Economic Co-operation and Development (OECD) vary widely in their ratio of capital tax rates to labor tax rates. This chapter’s motivation is the strong negative correlation between the capital/labor tax ratio and old dependency ratio (defined as the ratio of population older than 65 years old to population between 20 and 65 years old) among 21 OECD countries. I study a parsimonious overlapping generations (OLG) majority voting model. In equilibrium, the retired households and relatively old working households hold a large amount of capital and vote for a low capital tax rate (implying a high labor tax rate), while relatively young working households hold a small amount of capital and vote for a high capital tax rate (implying a low labor tax rate). As a result, the model implies that countries with more old people have relatively lower capital taxes. The model takes the old dependency ratio as given and delivers a capital/labor tax ratio chosen by the median voter. The calibrated model presented here can generate not only this negative correlation, but also the tax ratios for the 21 OECD countries studied. In the second chapter, I extend the first chapter and study the Japanese economy and taxation for the past three decades. Population aging is a serious social issue in Japan. This chapter also shows that demographics is an important variable to explain the time series data of capital and labor tax rates. Interestingly, the model predicts that a benevolent or utilitarian government would set a capital tax rate to be zero as in many standard tax models. This result emphasizes the importance of modeling a political economy, as opposed to a standard social planning economy that has been extensively used previously. Finally, the third chapter focuses on US immigration policy. Illegal immigration from Mexico to the United States has been a hot topic to academic researchers and policy makers. This study quantitatively investigates the welfare effects of illegal immigration to native households in the US. More specifically, I simulate the model economy when the government deports every illegal immigrant. The simulation shows that the social welfare increases by 0.01 percent on average, and the poorest households’ welfare increases by 0.1%. Although, initially, there is a decrease in the interest rate and the unemployment rate as well as an increase in the wage, these variables in the no-illegal-immigrant steady state are almost identical to the initial steady state which is calibrated to the US economy. / text

In February 2013, eleven Member States agreed to adopt the Commissions' Proposal for a Council Directive implementing enhanced cooperation in the area of financial transaction tax, COM (2013)71 final. This article reviews three thematic areas frequently discussed by practitioners and academia alike on the impact that the Proposal could have on companies operating within participating Member States. This includes the impact on capital and related costs, business strategy and compliance considerations. I ask the question whether the unintentional repercussions could be mitigated by making adjustments to the current Proposal including the expansion of exemptions and the adoption of an implementation framework that takes inspiration from the Value Added Tax System that is already implemented across Member States. (author's abstract) / Series: WU International Taxation Research Paper Series

Chapter 1: I analyze economies of scale for fire and police services by considering how per-household costs are affected by a municipality’s size. Using 2005-2008 municipal data for the Province of Ontario, I employ a partial-linear model to non-parametrically estimate per-household cost curves for each service. The results show that cost per household is a U-shaped function of municipal size for each service. For fire services, these costs are minimized at a population of about 20,000 residents, while for police services they are minimized at about 50,000 residents. Based on these results, implications are drawn for municipal amalgamation policy. Chapter 2: I review how the literature has continued to exclude the business property tax (BPT) from the marginal effective tax rate (METR) on capital investment for over 25 years. I recast the METR theory as it relates to the BPT and compute 2013 estimates of the METR for all 10 provinces in Canada with provincial BPTs included. Building on these estimates, I compute the METR inclusive of municipal BPTs for the largest municipality in each province. I find the BPT to be substantially damaging to municipal, provincial and international competitiveness. With the business property tax representing over 60% of the Canadian METR, among the various capital taxes it is by far the largest contributor to Canada’s investment barrier. Chapter 3: I estimate the responsiveness of structure investment and the tax base to commercial property taxes, taking a new step toward resolving the “benefit view” vs. “capital tax view” debate within the literature. Using a first-difference structural model to analyze 2006-2013 municipal data for the Province of Ontario, I improve upon past studies and build onto the literature in a number of ways. I find that commercial structure investment and tax base are highly sensitive to the property tax with Ontario’s assessment-weighted average tax elasticity (and tax-base elasticity) ranging from -0.80 to -0.90 at 2011 taxation levels. The results support the capital tax view of the business property tax, building onto the growing consensus that business property taxes substantially impact investment in structures and the value of the tax base.