Marginal Tax Rates and Income: New Time Series Evidence
AbstractThis paper estimates the dynamic effects of marginal tax rate changes on income reported on tax returns in the United States over the 1950-2010 period. After isolating exogenous variation in average marginal tax rates in structural vector autoregressions using a narrative identification approach, I find large positive effects in the top 1% of the income distribution. In contrast to earlier findings based on tax return data, I also find large effects in other income percentile brackets. A hypothetical tax reform cutting marginal rates only for the top 1% leads to sizeable increases in top 1\% incomes and has a positive effect on real GDP. There are also spillover effects to incomes outside of the top 1%, but top marginal rate cuts lead to greater inequality in pre-tax incomes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19171.
Date of creation: Jun 2013
Date of revision:
Note: ME PE
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- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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