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Jel Classification:H24 

Working Paper
Changes in the Distribution of After-Tax Wealth: Has Income Tax Policy Increased Wealth Inequality?

A substantial share of the wealth of Americans is held in tax-deferred form such as in retirement accounts or as unrealized capital gains. Most data and statistics on assets and wealth is reported on a pre-tax basis, but pre-tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well-being of families. In this paper, we describe the distribution of tax-deferred assets in the SCF from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and ...
Finance and Economics Discussion Series , Paper 2015-58

Working Paper
Income and Earnings Mobility in U.S. Tax Data

We use a large panel of federal income tax data to investigate intragenerational income mobility in the United States. We have two primary objectives. First, we explore the determinants of two-year changes in individual labor earnings and family incomes, such as job or industry changes, marriage, divorce, and geographic mobility. Second, we evaluate how federal income taxes stabilize or destabilize post-tax income changes relative to pre-tax changes. We find a relatively high degree of income mobility, with almost half of workers exhibiting earnings increases or decreases of at least 25 ...
Finance and Economics Discussion Series , Paper 2015-61

Working Paper
Household Incomes in Tax Data : Using Addresses to Move from Tax Unit to Household Income Distributions

Tax return data are increasingly the standard for tracking income statistics in the United States. However, these data have traditionally been limited by their inability to capture non-filers and to identify members of separate tax units living in the same household. We overcome these obstacles and create household records directly in the tax data using mailing address information included on tax forms. We then present the first set of tax-based household income and inequality measures for the entire income distribution. When comparing household income inequality results in the tax data to ...
Finance and Economics Discussion Series , Paper 2017-002

Working Paper
Evaluating the Success of President Johnson's War on Poverty: Revisiting the Historical Record Using a Full-Income Poverty Measure

We evaluate progress in President's Johnson's War on Poverty. We do so relative to the scientifically arbitrary but policy relevant 20 percent baseline poverty rate he established for 1963. No existing poverty measure fully captures poverty reductions based on the standard that President Johnson set. To fill this gap, we develop a Full-income Poverty Measure with thresholds set to match the 1963 Official Poverty Rate. We include cash income, taxes, and major in-kind transfers and update poverty thresholds for inflation annually. While the Official Poverty Rate fell from 19.5 percent in 1963 ...
Finance and Economics Discussion Series , Paper 2020-011

Working Paper
The Household Expenditure Response to a Consumption Tax Rate Increase

This study measures the effect of an increase in Japan's Value Added Tax rate on the timing of household expenditures and consumption, which do not necessarily coincide. The analysis finds that durable and storable expenditures surged in the month prior to the tax rate increase, fell sharply upon implementation, but quickly returned to their previous long-run levels. Non-storable non-durable expenditures increased slightly in the month prior to the tax rate increase, but were otherwise unresponsive. A dynamic structural model of household consumption reveals that the observed expenditure ...
Finance and Economics Discussion Series , Paper 2017-035

Working Paper
Metropolitan Area Home Prices and the Mortgage Interest Deduction: Estimates and Simulations from Policy Change

We simulate changes to metropolitan area home prices from reforming the Mortgage Interest Deduction (MID). Price simulations are based on an extended user cost model that incorporates two dimensions of behavioral change in home buyers: sensitivity of borrowing and the propensity to use tax deductions. We simulate prices with both inelastic and elastic supply. Our results show a wide range of price effects across metropolitan areas and prospective policies. Considering behavioral change and no supply elasticity, eliminating the MID results in average home price declines as steep as 13.5 ...
Working Papers (Old Series) , Paper 1516

Working Paper
Proxy SVARs: Asymptotic Theory, Bootstrap Inference, and the Effects of Income Tax Changes in the United States

Proxy structural vector autoregressions (SVARs) identify structural shocks in vector autoregressions (VARs) with external proxy variables that are correlated with the structural shocks of interest but uncorrelated with other structural shocks. We provide asymptotic theory for proxy SVARs when the VAR innovations and proxy variables are jointly ?-mixing. We also prove the asymptotic validity of a residual-based moving block bootstrap (MBB) for inference on statistics that depend jointly on estimators for the VAR coefficients and for covariances of the VAR innovations and proxy variables. These ...
Working Papers (Old Series) , Paper 1619

Working Paper
The Impact of the Tax Cuts and Jobs Act on Local Home Values

This paper simulates changes to neighborhood home prices resulting from reforms to tax preferences in the recently passed Tax Cuts and Jobs Act (TCJA). The simulation uses federal tax data summarized at a fine geography to impute homeowner rents at the zip code level across six income classes. Employing a user cost framework, I model rents as a function of prices under the old tax law and under the TCJA. While the average price impact of the TCJA is found to be ?5.7 percent, local effects range from 0 to ?23 percent across zip codes. Variation across income class is also large. Simulations by ...
Working Papers (Old Series) , Paper 1806

Briefing
Asymmetric responses to tax-induced changes in personal income: the 2013 payroll tax hike versus anticipated 2012 tax refunds

As part of the Boston Earned Income Tax Credit Coalition's free tax preparation service offered at the Boston Roxbury Resource Center between January and April 2013, 945 low-to-moderate income individuals were asked about payroll tax changes, financial planning, and their personal characteristics. Using these survey responses, the authors calculated how these individuals planned to respond to the payroll tax hike and their tax refund. The results show that their marginal propensity to consume (MPC) out of the tax refund is 30 percentage points lower than their spending reaction to the tax ...
Public Policy Brief

Working Paper
Estimating Taxable Income Responses with Elasticity Heterogeneity

We extend a standard taxable income model with its typical functional-form assumptions to account for nonlinear budget sets. We propose a new method to estimate taxable income elasticity that is more policy relevant than the typically estimated elasticity based on linearized budget sets. Using U.S. data from the NBER tax panel for 1979-1990 and differencing methods, we estimate an elasticity of 0.75 for taxable income and 0.20 for broad income. These estimates are higher than those obtained by specifications based on linearization. Our approach offers a new way to address the problem of ...
Working Papers , Paper 1611

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