Search Results
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 ...
Working Paper
The Near Term Growth Impact of the Tax Cuts and Jobs Act
This note uses existing empirical estimates of the macroeconomic effects of tax changes to project the near term impact of the Tax Cuts and Jobs Act on US GDP growth. Applying recent reduced form estimates of tax multipliers with the projected revenue impact of the Act yields a level of GDP that is predicted to be 1.3% higher by 2020, with most of the growth front-loaded in 2018. Accounting for the composition of the Act in terms of its individual and corporate provisions leads to a similar GDP increase by 2020, but with stronger growth in 2018 and a partial reversal in the following years. ...
Newsletter
Land Value Taxes—What They Are and Where They Come From
Changes to property tax structures, including the introduction of split-rate taxation, have been seeing increased interest from policymakers. Split-rate property taxation is rooted in the concept of land value taxation, which is an alternative to the form of property taxation used in most U.S. communities. In this Chicago Fed Letter, we explain what these alternatives to traditional property taxation are and provide some history on their implementation in the U.S.
Working Paper
Estimating the Intergenerational Elasticity and Rank Association in the U.S.: Overcoming the Current Limitations of Tax Data
Ideal estimates of the intergenerational elasticity (IGE) in income require a large panel of income data covering the entire working lifetimes for two generations. Previous studies have demonstrated that using short panels and covering only certain portions of the life cycle can lead to considerable bias. A recent influential study by Chetty et al. (2014) using tax data estimates the IGE in family income for the entire U.S. to be 0.344, considerably lower than most previous estimates. Despite the seeming advantages of extremely large samples of administrative tax data, I demonstrate that the ...
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
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, ...
Journal Article
Quantitative Macro Versus Sufficient Statistic Approach: A Laffer Curve Dilemma?
This article highlights two approaches to tax policy for the top 1 percent of earners. On the one hand are dynamic general equilibrium models requiring complicated calibration and simulation algorithms and strong structural assumptions. On the other hand is the sufficient statistic approach, which attempts to parsimoniously reach the trinity of empirical, theoretical, and policy relevance. The author illustrates ongoing work highlighting explicit connections between these two approaches.
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
Is Our Fiscal System Discouraging Marriage? A New Look at the Marriage Tax
We develop, apply, and test a new measure of the marriage tax: the reduction in future spending from getting married. Our measure is a comprehensive, actuarial (expected) present value. It incorporates all major and most minor US tax and benefit programs, weighing the present value of additional net taxes from marrying along each marital survivor path by the path’s probability. And it assumes clone marriage—marrying oneself—to ensure the living-standard loss from marrying is unaffected by spousal choice. We calculate our marriage tax for young respondents using the Survey of Consumer ...
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.