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

Here are slides from my 10/1/2012 presentation at Berkeley.

Abstract:
This paper investigates how tax changes for different income groups affect macroeconomic activity. Using historical tax return data from NBER’s TAXSIM, I construct a measure of who received (or who paid for) postwar tax changes for each income and payroll tax change that Romer & Romer (2010) classify as exogenous. At the national level, I aggregate tax changes for all taxpayers in the the bottom 90% and the top 10% of AGI and relate these aggregates to output, employment, and consumption growth. At the state level, I construct Bartik instruments for state tax shocks using national tax changes and each state’s share of high income taxpayers. If tax cuts for high income earners generate substantial economic activity, then states with a large share of high income taxpayers should grow faster following a tax cut for high income earners. I find that the negative relationship between tax changes and real GDP growth over a two year period is almost entirely driven by tax changes for the bottom 90%. The empirical relationship between tax cuts for the top 10% percent and job creation is negligible in magnitude, statistically insignificant, and much weaker than that of equivalently sized tax cuts for the bottom 90%.

About these ads

About ozidar

Graduate student at UC Berkeley, studying public finance & labor economics. https://sites.google.com/site/omzidar/
This entry was posted in Uncategorized and tagged , , , , , , , , , . Bookmark the permalink.

11 Responses to Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth & Employment

  1. Pingback: Tax Cuts for Job Creators | Forex Market Today

  2. Pingback: Tax Cuts for Job Creators

  3. Pingback: Today’s Economists: Laura D’Andrea Tyson and Owen Zidar: Tax Cuts for Job Creators | Mobile News Plus

  4. Pingback: Tax Cuts for Job Creators – Summary | owenzidar

  5. Martin Kessler says:

    I recall a study that reported IMF country studies found that as a matter of general rule the level of economic activity varies inversely with the level of taxes. Thinking it through that makes sense, even for the converse, if you understand economics. A proof cannot be replaced by pointing to a fact.

  6. Pingback: Laura Tyson: Tax Cuts for Job Creators Don’t Produce Jobs - 美国税1on1

  7. Pingback: Tax Cuts for Job Creators « The blog for taxspecialists

  8. Pingback: US TAX-Tax Cuts for Job Creators « The blog for taxspecialists

  9. Pingback: Do Tax Cuts Stimulate the Economy? | FavStocks

  10. Pingback: Republicans Censor What They Can’t Refute – Bruce Bartlett | owenzidar

  11. Pingback: Yes, Your Paycheck Was Smaller Last Week… | The Principal Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s