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Income and Earnings Mobility in U.S. Tax Data

Author

Listed:
  • Larrimore, Jeff

    () (Board of Governors of the Federal Reserve System (U.S.))

  • Mortenson, Jacob

    (Georgetown University)

  • Splinter, David

    (Joint Committee on Taxation)

Abstract

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 percent, and two-fifths of tax units experiencing income changes of this magnitude. Male and female labor income mobility patterns are remarkably similar, though marriage is associated with earnings gains among men, but is associated with modest earnings declines among women. We also observe that large income gains are most likely among families that add workers - either through marriage or through a second family member entering the workforce.

Suggested Citation

  • Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2015. "Income and Earnings Mobility in U.S. Tax Data," Finance and Economics Discussion Series 2015-61, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2015-61
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    File URL: http://dx.doi.org/10.17016/FEDS.2015.061
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    References listed on IDEAS

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    3. Marianne Bitler & Hilary Hoynes & Elira Kuka, 2017. "Do In-Work Tax Credits Serve as a Safety Net?," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 319-350.
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    5. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1553-1623.
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    Cited by:

    1. Mario Alloza, 2016. "The Impact of Taxes on Income Mobility," Discussion Papers 1632, Centre for Macroeconomics (CFM).

    More about this item

    Keywords

    Administrative data; income mobility; post-tax income;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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