Business in the United States: Who Owns it and How Much Tax Do They Pay?

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Business in the United States: Who Owns it and How Much Tax Do They Pay?

“Pass-through” businesses like partnerships and S-corporations now generate over half of U.S. business income and account for over half of the post-1980 rise in the top- 1% income share. We use administrative tax data from 2011 to identify pass-through business owners and estimate how much tax they pay. We present three findings. (1) Relative to traditional business income, pass-through business income is substantially more concentrated among high-earners. (2) Partnership ownership is opaque: 20% of the income goes to unclassifiable partners, and 15% of the income is earned in circularly owned partnerships. (3) The average federal income tax rate on U.S. pass- through business income is 19%—much lower than the average rate on traditional corporations. If pass-through activity had remained at 1980’s low level, strong but straightforward assumptions imply that the 2011 average U.S. tax rate on total U.S. business income would have been 28% rather than 24%, and tax revenue would have been at least $100 billion higher.

Full paper here.

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Sufi on household debt, redistribution and monetary policy during the economic slump

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NBER Panel on Greek Crisis

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Do Banks Pass Through Credit Expansions? The Marginal Profitability of Consumer Lending During the Great Recession

From Sumit Agarwal, Souphala Chomsisengphet, Neale Mahoney, and Johannes Stroebel:

The effect of bank-mediated stimulus on household borrowing depends on whether banks pass through credit expansions to households with a high marginal propensity to borrow (MPB). We use panel data on 14.2 million U.S. credit card accounts and 812 credit limit regression disconti- nuities to estimate the MPB for households with different FICO credit scores. We find substantial heterogeneity, with a $1 increase in credit limits raising total unsecured borrowing after 12 months by 58 cents for consumers with the lowest FICO scores (≤660) while having no effect on total bor- rowing by consumers with the highest FICO scores (> 740). We use the same credit limit regression discontinuities to estimate banks’ marginal propensity to lend out of a decrease in their cost of funds. For the lowest FICO score households, higher credit limits quickly reduce marginal profits, limiting the pass-through of credit expansions to those households. We estimate that a 1 percentage point reduction in the cost of funds raises optimal credit limits by $135 for consumers with FICO scores below 660 versus $1,478 for consumers with FICO scores above 740. We conclude that banks have the least incentive to pass through credit expansions to households that want to borrow the most and discuss the implications for bank-mediated stimulus.

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The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure

From Deborah Goldschmidt and Johannes Schmieder:

The nature of the relationship between employers and employees has been changing over the last decades, with firms increasingly relying on contractors, temp agencies and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside of the boundary of lead employers to contracting firms. For this end we develop a new method for identifying outsourcing of food, cleaning, security and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10-15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason why firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing accounts for around 10 percent of the increase in German wage inequality since the 1980s.

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Local Elections in America Project: “a digital archive of past election results”

Here is their website. From a quick glance, it seems to have election data since 1970 for most if not all elected offices ranging from local to federal offices. Awesome.

HT:

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