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Discussion Paper
How Will the New Tax Law Affectt Homeowners in High Tax States? It Depends
The Tax Cuts and Jobs Act of 2017 (TCJA) introduces significant changes to the federal income tax code for individuals and businesses. Several provisions of the new tax law are particularly significant for the owner?occupied housing market. In this blog post, we compare the federal tax liability and the marginal after-tax cost of mortgage interest and property taxes under the old and new tax codes for a wide range of hypothetical recent home buyers in a high tax state. We find that impacts vary substantially along the income/home price distribution.
Discussion Paper
Mixed Impacts of the Federal Tax Reform on Consumer Expectations
The Tax Cuts and Jobs Act of 2017 changed the tax brackets, tax rates, credits and deductions for individuals and similarly altered corporate tax rates, deductions and exclusions. In this post, we examine whether the reform has shifted individuals’ expectations about their financial situation and the macroeconomic outlook. We also ask whether households have already started to adjust their behavior in line with their expectations. In order to answer these questions, we use novel data from a special module of the New York Fed’s Survey of Consumer Expectations (SCE) fielded in February 2018 ...
Working Paper
The redistributional consequences of tax reform under financial integration
I quantify the welfare effects of replacing the US capital income tax with higher labor income taxes under international financial integration using a two-country, heterogeneous-agent incomplete markets model calibrated to represent the US and the rest of the world. Short-run and long-run factor price dynamics are key: after the tax reform, interest rates rise less under financial openness than in autarky. Therefore, wealthy households gain less. Post-tax wages also fall less as a result of the faster capital accumulation, so the poor are hurt less. Hence, the distributional impacts of the ...