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Journal Article
Pink and Poverty Taxes on Marriage
A "pink tax" is the extra cost charged for goods and services esigned for women. In this research, we expand the scope of this pink tax by examining gender and income differentials in marriage taxes. A marriage tax reflects the decline in spending power as a result of the difference in taxes and transfer benefits that arise from marriage. We use a lifetime measure of the marriage tax and show that low-income females with children are penalized the most, with a loss of 3.35 percent of their lifetime resources because of marriage. This marriage tax also makes a significant difference to their ...
Briefing
Asymmetric responses to tax-induced changes in personal income: the 2013 payroll tax hike versus anticipated 2012 tax refunds
As part of the Boston Earned Income Tax Credit Coalition's free tax preparation service offered at the Boston Roxbury Resource Center between January and April 2013, 945 low-to-moderate income individuals were asked about payroll tax changes, financial planning, and their personal characteristics. Using these survey responses, the authors calculated how these individuals planned to respond to the payroll tax hike and their tax refund. The results show that their marginal propensity to consume (MPC) out of the tax refund is 30 percentage points lower than their spending reaction to the tax ...
Working Paper
Breaking the Implicit Contract: Using Pension Freezes to Study Lifetime Labor Supply
This paper studies the elimination of traditional pensions and subsequent adoption of 401(k) plans by U.S. employers. Using thousands of firm-level natural experiments, it shows that unexpected losses in future compensation engendered by pension plan transitions induce premature retirement for some workers and delayed retirement for others. Observed heterogeneity in retirement behavior is indicative of differences in wealth and in preferences for leisure. Using credibly identified treatment effects as estimation targets, it fits a structural model of retirement and uses the model to evaluate ...
Working Paper
Metropolitan Area Home Prices and the Mortgage Interest Deduction: Estimates and Simulations from Policy Change
We simulate changes to metropolitan area home prices from reforming the Mortgage Interest Deduction (MID). Price simulations are based on an extended user cost model that incorporates two dimensions of behavioral change in home buyers: sensitivity of borrowing and the propensity to use tax deductions. We simulate prices with both inelastic and elastic supply. Our results show a wide range of price effects across metropolitan areas and prospective policies. Considering behavioral change and no supply elasticity, eliminating the MID results in average home price declines as steep as 13.5 ...
Working Paper
Proxy SVARs: Asymptotic Theory, Bootstrap Inference, and the Effects of Income Tax Changes in the United States
Proxy structural vector autoregressions (SVARs) identify structural shocks in vector autoregressions (VARs) with external proxy variables that are correlated with the structural shocks of interest but uncorrelated with other structural shocks. We provide asymptotic theory for proxy SVARs when the VAR innovations and proxy variables are jointly ?-mixing. We also prove the asymptotic validity of a residual-based moving block bootstrap (MBB) for inference on statistics that depend jointly on estimators for the VAR coefficients and for covariances of the VAR innovations and proxy variables. These ...
Working Paper
The Impact of the Tax Cuts and Jobs Act on Local Home Values
This paper simulates changes to neighborhood home prices resulting from reforms to tax preferences in the recently passed Tax Cuts and Jobs Act (TCJA). The simulation uses federal tax data summarized at a fine geography to impute homeowner rents at the zip code level across six income classes. Employing a user cost framework, I model rents as a function of prices under the old tax law and under the TCJA. While the average price impact of the TCJA is found to be ?5.7 percent, local effects range from 0 to ?23 percent across zip codes. Variation across income class is also large. Simulations by ...
Working Paper
The Macroeconomic Effects of the Tax Cuts and Jobs Act
This paper studies the macroeconomic effects of seven key TCJA provisions, including the tax cuts for individuals and businesses, the bonus depreciation of equipment, the amortization of R&D expenses, and the limits on interest deductibility. I use a dynamic general equilibrium model with interest deductibility and accelerated depreciation. I find that, initially, the tax reform had a small positive impact on output and investment. In the medium term, however, the effect on output will diminish, and the effect on investment will turn negative. The tax reform will depress investment in R&D. ...
Working Paper
The Macroeconomic Effects of Universal Basic Income Programs
What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US ...
Working Paper
Estimating Taxable Income Responses with Elasticity Heterogeneity
We extend a standard taxable income model with its typical functional-form assumptions to account for nonlinear budget sets. We propose a new method to estimate taxable income elasticity that is more policy relevant than the typically estimated elasticity based on linearized budget sets. Using U.S. data from the NBER tax panel for 1979-1990 and differencing methods, we estimate an elasticity of 0.75 for taxable income and 0.20 for broad income. These estimates are higher than those obtained by specifications based on linearization. Our approach offers a new way to address the problem of ...
Working Paper
Declining female labor supply elasticities in the U.S. and implications for tax policy: evidence from panel data
Recent work has provided compelling evidence of a long-term decline in US female labor supply elasticities with respect to wages and to income. While previous work used cross-sectional data from the Current Population Survey (CPS), we reexamine the trend for married women using panel data from the Panel Study of Income Dynamics (PSID) from 1980 to 2006. We find evidence in support of a long-term decline in married females? labor supply elasticities on the participation margin, but less so on the hours margin. We also extend the analysis to investigating the implications of these results on ...