Answer THREE of the following (from 6)
1] Feldstein (1999) suggests that estimates of the elasticity of labour supply underestimate the deadweight loss of the income tax compared to estimates based on the elasticity of taxable income (ETI).
Demonstrate within an appropriate model the effect of taxes on labour supply.
Discuss the differences between the predictions from this model and the discussion of the ETI in Feldstein.
Assess how empirical estimates of the ETI may guide tax policy.
Feldstein, M, 1999. Tax Avoidance and the Deadweight Loss of the Income Tax. The Review of Economics and Statistics, 81 (4), 674-680.
2] Kolm (1973) observes that in order to obtain any given tax yield at the minimum cost, a tax authority should “hang tax evaders with probability zero.”
Demonstrate an appropriate economic model for tax evasion and explain Kolm’s comment within the model. Assess reasons why such a policy is rarely observed in practice.
Kolm, S-C. 1973. A note on optimum tax evasion. Journal of Public Economics, 2, 265-270.
3] Okun (1975) suggests that society may be willing to allow some leakage of income in a tax and transfer system to reduce the degree of income inequality.
Relate Okun’s notion of the leaky bucket to the trade-off between efficiency and equity in a system whereby a government raises its revenue based on the taxation of goods and services.
Assess the advantages and disadvantages of different forms of taxes on goods and services.
Okun, A. 1975. Equity and Efficiency: The Big Tradeoff. The Brookings Institution, Washington, DC.
4] Data from the ONS (2021) shows that the ratio of the median house price to median gross annual income for England has increased from 5.11 to 7.84 from 2002 to 2020.
Explain arguments for and against government intervention in the markets for housing. Assess the impact of any proposed interventions.
ONS. 2021. House price to residence-based earnings ratio.
idencebasedearningslowerquartileandmedian [Accessed 28-June-2021]
5] The Republic of Ireland raises revenue through the capital acquisitions tax (CAT), a tax on gifts and inheritances received over a lifetime above a specified threshold (Revenue, 2021).
Analyse the advantages and disadvantages of a such a tax relative to the inheritance tax system used in the UK
(GOV.UK, n.d.).
Revenue, 2021. “Gift and Inheritance Tax (Capital Acquisitions Tax – CAT).”
[Accessed 28-June-2021]
GOV.UK, nd. “Inheritance Tax” [Accessed 28-June-2021]
6] The Economist (2021) describes the “triple lock” used to determine rate changes of the UK state pension.
Analyse the various rationales for government intervention in the provision of pensions, including the failure by individuals to save enough for retirement.
Discuss reasons for the policy of the “triple lock.”
The Economist, 2021. “The triple-lock rule poses a post-pandemic problem.” https://www [Accessed 28-Jun-2021
