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Working Paper
Taxing top earners: a human capital perspective
We assess the consequences of substantially increasing the marginal tax rate on U.S. top earners using a human capital model. The top of the model Laffer curve occurs at a 53 percent top tax rate. Tax revenues and the tax rate at the top of the Laffer curve are smaller compared to an otherwise similar model that ignores the possibility of skill change in response to a tax reform. We also show that if one applies the methods used by Diamond and Saez (2011) to provide quantitative guidance for setting the tax rate on top earners to model data then the resulting tax rate exceeds the tax rate at ...
Working Paper
Report on the Potential Impacts of Property Tax Abatement on Rental Housing Construction in Boston
Boston’s high housing costs reflect a historic failure to build enough units to satisfy demand. Interest rates and construction costs have risen recently, and the flow of new market-rate residential housing projects has slowed. To spur more construction, the City of Boston is considering various policy options. Our committee was asked by Boston Mayor Michelle Wu to assess the market impacts of one of these options: real estate tax abatements. This report presents our analysis of the likely effects on the number of units constructed and the costs to taxpayers of various tax abatement ...
Working Paper
Has COVID Reversed Gentrification in Major U.S. Cities? An Empirical Examination of Residential Mobility in Gentrifying Neighborhoods During the COVID-19 Crisis
This paper examines whether neighborhoods that had been gentrifying lost their appeal during the pandemic because of COVID-induced health risks and increased work-from-home arrangements. By following the mobility pattern of residents in gentrifying neighborhoods in 39 major U.S. cities, we note a larger increase of 1.2 percentage points in the outmigration rate from gentrifying neighborhoods by the end of 2021, relative to nongentrifying ones, with out-of-city moves accounting for over 71 percent of the increased flight. The share of out-of-city moves into gentrifying neighborhoods also ...
Working Paper
Should Platforms be Allowed to Charge Ad Valorem Fees?
Many platforms that facilitate transactions between buyers and sellers charge ad valorem fees in which fees depend on the transaction price set by sellers. Given these platforms do not incur significant costs that vary with transaction prices, their use of ad valorem fees has raised controversies about the efficiency of this practice. In this paper, using a model that connects platforms' use of ad valorem fees to third-degree price discrimination, we evaluate the welfare consequences of banning such fees. We find the use of ad valorem fees generally increases welfare, including for calibrated ...
Working Paper
The Sufficient Statistic Approach: Predicting the Top of the Laffer Curve
We provide a formula for the tax rate at the top of the Laffer curve as a function of three elasticities. Our formula applies to static models and to steady states of dynamic models. One of the elasticities that enters our formula has been estimated in the elasticity of taxable income literature. We apply standard empirical methods from this literature to data produced by reforming the tax system in a model economy. We find that these standard methods underestimate the relevant elasticity in models with endogenous human capital accumulation.
Journal Article
Housing affordability: recommendations for new research to guide policy
This article highlights areas where economic research is needed to guide federal policymakers addressing the challenge of improving housing affordability. The author places these research recommendations in the framework of five key issues, reflecting policymakers? need to identify a rationale for government action; to employ a single, clear measure to gauge affordability; to understand the unintended consequences of current housing policies; to ensure that the political environment is considered when developing policy; and to decide whether to use housing finance reform as a means of ...
Working Paper
Smoothing state tax revenues over the business cycle: gauging fiscal needs and opportunities
During the two most recent U.S. recessions in 2001 and in 2007?2009, state governments experienced an unusually high degree of fiscal stress due to increased revenue cyclicality. Expanding upon the aggregate evidence, this paper explores the degree to which individual states have experienced fluctuating tax receipts over the business cycle. The findings provide state policymakers with information to better understand the extent and causes of this tax revenue cyclicality and, in the context of balanced budget requirements, the efficacy of alternative measures that might be employed to smooth ...
Working Paper
Disinvesting in the future?: a comprehensive examination of the effects of state appropriations for public higher education
In aggregate, state appropriations are the largest revenue source for public higher education in the United States. However, these appropriations have significantly declined over past decades, drawing serious concerns about the potential negative impact on schools and students. This paper provides a more comprehensive study of the effects of state appropriations than previous research, while explicitly exploring and testing the heterogeneity of the effects by institutional type. It finds strong evidence of the negative effects of state appropriation cuts in the areas of tuition and fees, ...
Working Paper
Employment and Welfare Effects of the Quota for Disabled Workers in Brazil
I study the effect of a quota for disabled workers on the labor market and on welfare. Using a task-based model, I show that the effect of a quota will depend on the productivity of disabled workers and their labor supply elasticity. I estimate the productivity of disabled workers using variation from inspections of the quota. I find that the quota increased the hiring of disabled workers, but it reduced wages and employment of non-disabled workers, suggesting that the quota reduced firms’ productivity. I estimate the labor supply elasticity of disabled workers using heterogeneous exposure ...
Working Paper
Dynamic Sales Tax Competition: Evidence from Panel Data at the Border
We examine both vertical and horizontal tax competition over time by studying the strategic response of county sales taxation to state sales taxes and to cross-border neighboring municipalities’ combined (state and county) taxes. Using county and state sales tax data from 2003 through 2009, we employ both static and dynamic panel analysis as well as an instrumental variables approach in combination with a border analysis. Our results confirm the presence of tax competition in the cross section, as previous studies have found. Results from the fixed-effects and dynamic panel analysis also ...