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Working Paper
Fiscal Stimulus and Firms: A Tale of Two Recessions

In this paper, I examine the effects of a countercyclical fiscal policy that gave firms additional tax refunds--additional liquidity--at the end of the past two recessions. I take advantage of a discontinuity in the slope of the tax refund formula to estimate the policy's impact. I find that after passage of the policy in 2002, firms allocated $0.40 of every tax refund dollar to investment. After passage of the policy in 2009, in contrast, firms used the refunds to increase cash holdings ($0.96 of every refund dollar) before paying down debt in the following year. I provide evidence that ...
Finance and Economics Discussion Series , Paper 2016-13

Working Paper
Changes in the Distribution of After-Tax Wealth: Has Income Tax Policy Increased Wealth Inequality?

A substantial share of the wealth of Americans is held in tax-deferred form such as in retirement accounts or as unrealized capital gains. Most data and statistics on assets and wealth is reported on a pre-tax basis, but pre-tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well-being of families. In this paper, we describe the distribution of tax-deferred assets in the SCF from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and ...
Finance and Economics Discussion Series , Paper 2015-58

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 Series , Paper WP-2015-4

The Burden of Taxation in the United States and Germany

After 35 years without significant changes to the federal tax code in the United States, tax reform is back on the legislative agenda. Both the congressional Republican delegation (the House GOP) and the Trump administration (the administration) have released draft proposals for tax reform. And both focus heavily on reform of corporate income taxation. The reason for this is quite simple: Increased globalization has made it easier for multinational enterprises to shift their reported profits around the world in order to pay less in taxes. This has led to concerns about the erosion of the U.S. ...
Chicago Fed Letter

Journal Article
External Shocks versus Domestic Policies in Emerging Markets

Debt crises in emerging markets have been linked to large fiscal deficits, high inflation rates, and large devaluations. This article studies a sovereign default model with domestic fiscal and monetary policies to understand Argentina's experience during the 2000s commodity boom (2005–2017), following the default of 2001. The model suggests that domestic policies played a critical role in Argentina's poor economic performance. Despite exceptionally favorable terms of trade, a rise in government spending led to higher taxation, inflation and currency depreciation, and lower output. Economic ...
Review , Volume 105 , Issue 2 , Pages 108-121

Working Paper
Time Averaging Meets Labor Supplies of Heckman, Lochner, and Taber

We incorporate time-averaging into the canonical model of Heckman, Lochner, and Taber (1998) (HLT) to study retirement decisions, government policies, and their interaction with the aggregate labor supply elasticity. The HLT model forced all agents to retire at age 65, while our model allows them to choose career lengths. A benchmark social security system puts all of our workers at corner solutions of their career-length choice problems and lets our model reproduce HLT model outcomes. But alternative tax and social security arrangements dislodge some agents from those corners, bringing ...
Working Papers , Paper 2023-012

Improving Transparency and Accountability in State Budgeting

On December 7, 2015, the Volcker Alliance, the Institute of Government and Public Affairs at the University of Illinois and the Federal Reserve Bank of Chicago held a conference examining ways to increase transparency and accountability in state (and local) budgeting. Based on research presented at the conference, the main speakers recommended budgetary principles and practices that, if adopted, would improve public understanding of the true nature, cost and consequences of states? tax policies and spending commitments.
Chicago Fed Letter

Working Paper
On the Distributional Effects of International Tariffs

What are the distributional consequences of tariffs? We build a trade model with incomplete asset markets and households that are heterogeneous in their income, wealth, and labor skill. We increase tariffs by 5 percentage points and examine several budget-neutral fiscal policies for redistributing tariff revenue. Without redistribution, tariffs hurt all households, but higher tradables prices disproportionately harm the poor and the ensuing decline in the skill premium disproportionately harms the skilled. With redistribution, lowering the labor income tax leads to lower economic activity but ...
Working Papers , Paper 20-18

Working Paper
Larceny in the Product Market: A Hidden Tax?

This paper compares the distortionary impact of larceny theft across different product markets, characterizing such crime as a “hidden tax” on producers or consumers. We estimate the size of this tax and how it is affected by exogenous changes in larceny rates driven by the enactment of higher felony larceny thresholds. Pre-enactment hidden tax rates are small, ranging from 0.1 percent to 0.4 percent. These tax rates rise or fall with enactment, varying by product market. Such exogenous changes in the hidden tax induce state-level annual welfare changes that are minimal, ranging from ...
Working Papers , Paper 20-14

Working Paper
On the Distributional Effects of International Tariffs

We provide a quantitative analysis of the distributional effects of the 2018 increase in tariffs by the US and its major trading partners. We build a trade model with incomplete asset markets and households that are heterogeneous in their age, income, wealth, and labor skill. When tariff revenues are used to reduce distortionary taxes on consumption, labor, and capital income, the average welfare loss from the trade war is equivalent to a permanent 0.1 percent reduction in consumption. Much larger welfare losses are concentrated among retirees and low-wealth households, while only wealthy ...
Working Papers , Paper 20-18R2


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