Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment

2018/10/30 by Owen Zidar · 8 citations
Economics, Econometrics and Finance · Social Sciences · Business, Management and Accounting · #Fiscal Policy and Economic Growth #Gender, Labor, and Family Dynamics #Financial Literacy, Pension, Retirement Analysis

paper · doi:10.1086/701424

Abstract

This paper investigates how tax changes for different income groups affect aggregate economic activity. I construct a measure of who received (or paid for) tax changes in the postwar period using tax return data from NBER’s TAXSIM. Variation in the income distribution across US states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and that the effect of tax cuts for the top 10 percent on employment growth is small.

Citations

• The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review
• Estimation and Inference of Impulse Responses by Local Projections
• The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks
• Salience and Taxation: Theory and Evidence

Cited by

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• Welfare Effects of Labor Income Tax Changes on Married Couples: A\n Sufficient Statistics Approach
• Income Taxes, Gross Hourly Wages, and the Anatomy of Behavioral Responses: Evidence from a Danish Tax Reform
• The Macroeconomic Effects of Income and Consumption Tax Changes
• Beyond the spike at zero: Understanding nominal wage rigidity through empirical and model-based approaches
• Corporate tax cuts, merger activity, and shareholder wealth
• Supply-side economics [wikipedia]

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