Papers by Daniel Feenberg
National Bureau of Economic Research, 1985
The two main workhorses of state tax systems are levies on sales and individual incomes, In this ... more The two main workhorses of state tax systems are levies on sales and individual incomes, In this paper we develop and implement a coherent methodology for characterizing these systems. The measures thus generated are used to show how the various systems differ across states, and how they evolved over the seven year period 1977-1983. We consider the systems' revenue elasticities with respect to income, average and marginal tax rates at various income levels, and several other issues as well.
To address the question of whether IRA5 contribute to capital formation, we use the IRS/Universit... more To address the question of whether IRA5 contribute to capital formation, we use the IRS/University of Michigan taxpayer sample for income tax returns during 1980-84. By matching families across a five-year period, c.ie can estimate the dynamic interactions of IRA purchases and other types of saving, correct for individual differences, and test whether IRA purchases are in part offset by other (net> asset sales. The "reshuffling" hypothesis implies that taxpayers who enroll in IRAs should, over time, experience a drop in net taxable interest and dividend income as their taxable assets (or new loans) are used to purchase IRAs. Conversely, the "new saving" view of IRAs implies that taxable interest and dividend income should be unaffected by IRA purchases. We find little or no evidence which favors the view that IRAs are funded by cashing out existing taxable assets. In fact, individuals who purchased IRAs in each year between 1982-84 increased their asset holdings by more than those who did not purchase IRAs. In one sense, our results strongly confirm the studies by Venti and Wise and Hubbard that IRA saving represents new saving. But shuffling could still occur, albeit on a secondary level: families who are accumulating both taxable assets and IRAs might have accumulated even more taxable assets had IRA5 not been available.
2017 Meeting Papers, 2017
We provide a statistical description of the evolution of tax progressivity and income inequality ... more We provide a statistical description of the evolution of tax progressivity and income inequality in the U.S. for the period 1960-2008, using tax revenue data. We document a large and steady increase of tax progressivity over our sample, with brief exceptions during the early 1980's and early 2000's. We provide flexible-parametric and non-parametric-yearly estimates of the tax distribution. We then use a canonical heterogeneous households model (Aiyagari, 1994) to compare the optimal tax progressivity to the current U.S. tax system. Our findings are threefold. First, under the joint assumptions of a linear capital capital tax and an intensive labor supply choice, the optimal progressivity is very close to the one measured in the data. However, if the labor supply choice is on the extensive margin only, optimal tax progressivity is much larger than in the data. Third, preliminary results suggest that the optimal tax system should allow for a non-zero cross-term between capital and labor income taxes: there are welfare gains in allowing the marginal capital tax rate to be increasing in labor income.
National Bureau of Economic Research, 1982
Recent cross-section studies of the demand for charitable g~v~ng, owner occupied housing, capital... more Recent cross-section studies of the demand for charitable g~v~ng, owner occupied housing, capital gains realizations, and the supply of labor hours have been careful to use prices net of income tax levies. The use of after-tax prices in a behavioral equation is a direct consequence of utility maximization under a budget constraint and cannot be objected to. Nevertheless, when most or all of the variance in prices comes from differences in marginal tax rates, questions can arise about the identification of structural parameters. The variables which deterMine marginal tax rates, chiefly income and marital status, are quite plausible determinants of the behavior being modelled, in addition to any indirect effect they might have through the tax price. A non-linear dependence amonti the explanatory variables of a linear regression is not a source of bias provided the linear specification is known to be correct. Because the function form of a demand equation is not known a priori, this identification through funct'ional form is not persuasive. In this note we propose an instrumental variable estimation designed to exploit any independent variation present, and which allows unbiased estimates of tax-price elasticities under quite general conditions. The estimator is applied to the demand for charitable giving. The tax-price elasticity of the demand for charitable giving is estimated to be-1.23.
The views expressed herein are those of the authors and do not necessarily reflect the views of t... more The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
Journal of Financial Economics, Sep 1, 1981
Growth and Change, Apr 1, 1986
This paper provides careful estimates of the impact of removing the deductibility of state and lo... more This paper provides careful estimates of the impact of removing the deductibility of state and local taxes by state and by income class. We show how deductibility affects marginal and average tax rates for both state and federal tax systems. One striking result is that combined federal income tax and state tax burdens would generally fall under the President's tax reform proposal, even for high income people in high tax states.
The Review of Economics and Statistics, Mar 1, 2017
When choices are made from ordered lists, individuals can exhibit biases toward selecting certain... more When choices are made from ordered lists, individuals can exhibit biases toward selecting certain options as a result of the ordering. We examine this phenomenon in the context of consumer response to the ordering of economics papers in an e-mail announcement issued by the NBER. We show that despite the effectively random list placement, papers listed first each week are about 30% more likely to be viewed, downloaded, and subsequently cited. We suggest that a model of ''skimming'' behavior, where individuals focus on the first few papers in the list due to time constraints, would be most consistent with our findings.
We are grateful to Brian Hall and Jeffrey Liebman for providing us with data on CEO compensation,... more We are grateful to Brian Hall and Jeffrey Liebman for providing us with data on CEO compensation, to Daniel Bergstresser for assistance with the Survey of Consumer Finances, and to Nada Eissa for helpful comments. We thank the National Bureau of Economic Research, the National Science Foundation (Poterba), and the Smith Richardson Foundation for research support. The views expressed herein are those of the authors and are not necessarily those of the National Bureau of Economic Research.
Tax Policy and the Economy, 1997
Tax Policy and the Economy, 1993
This paper uses tax return data for the period 1951-1990 to investigate the rising share of adjus... more This paper uses tax return data for the period 1951-1990 to investigate the rising share of adjusted gross income (AGI) that is reported on very high income tax returns. We find that most of the increase in the share of AGI reported by high-income taxpayers is due to an increase in reported income for the one quarter of one percent of taxpayers with the highest AGIs. The share of total AGI reported by these taxpayers rose slowly in the early 1980s, and increased sharply in 1987 and 1988. This pattern suggests that at least part of the increase in the income share of high-AGI taxpayers was due to the changing tax incentives that were enacted in the 1986 Tax Reform Act. By lowering marginal tax rates on top-income households from 50% to 28%, TRA86 reduced the incentive for these households to engage in tax avoidance activities. We also find substantial differences in the growth of the income share of the highest one quarter of one percent of taxpayers, and the share of other very high income taxpayers. This suggests that the increasing inequality of reported incomes at very high levels may not be driven by the same factors that have generated widening wage inequality throughout the income distribution and over a longer time period. This paper was prepared for the NBER Tax Policy and the Economy meeting, Washington, DC, November 17, 1992. We are grateful to Caitlin Carroll for research assistance, to David Cutler, Jerry Hausman, and Lawrence Katz for helpful comments, and to the National Science Foundation for research support. The evolution of the U.S. income distribution has recently attracted enormous academic and popular attention. Systematic studies of labor earnings based on large household surveys, such as Bound and Johnson (1992), Katz and Murphy (1992), Levy and Michel (1991), and Murphy and Welch (1992), have demonstrated that labor earnings, the most important component of income for all but the highest-income households, became more unequal during the 1980s. The returns to college education rose, and the real earnings of low-skill individuals declined relative to those of better-trained workers. The most controversial feature of the income distribution, however, is the apparent increase in the share of income accruing to a small group of very highincome households: those in the top one percent of the income distribution. A widely-publicized calculation, described in Krugman (1992), suggests that very high income households have recently received a disproportionate share of the real income growth in the U.S. economy during the last decade.
Journal of Economic Perspectives, Aug 1, 2000
utomatic stabilizers are those elements of fiscal policy that tend to mitigate output fluctuation... more utomatic stabilizers are those elements of fiscal policy that tend to mitigate output fluctuations without any explicit government action. From the traditional Keynesian perspective, automatic stabilizers could include any components of the government budget that act to offset fluctuations in effective demand by reducing taxes and increasing government spending in recession, and doing the opposite in expansion. Perhaps the most commonly discussed automatic stabilizer is the federal income tax, which reduces the multiplier effects of demand shocks through the marginal taxation of income fluctuations. A progressive income tax with high marginal tax rates could substantially reduce fluctuations in after-tax income and, so the argument goes, private spending, without the need for any explicit policy changes. Moreover, automatic stabilizers avoid the slow implementation that can cause discretionary policy to lag so far behind events. Since the period following World War II when automatic stabilizers were first discussed seriously, the U.S. tax system has experienced significant changes. The maximum marginal tax rate has declined substantially since the early 1960s. Over the same period, the payroll tax has grown steadily as a share of federal revenue, this growth offsetting relative declines in corporate and excise tax collections. Also changing over this period has been the distribution of income, with a marked increase in the share of income received by high-income taxpayers. In the light of these and other changes, it is useful to consider what has happened to the tax
Social Science Research Network, 2003
This paper examines the impact of the Alternative Minimum Tax on the weighted average marginal ta... more This paper examines the impact of the Alternative Minimum Tax on the weighted average marginal tax rates that apply to various components of taxable income. It also considers the impact of several AMT reform proposals on the number of AMT taxpayers, the total revenue collected from the AMT, and the weighted average marginal tax rates that apply to wages, capital income, and deductions such as state and local taxes and charitable gifts. The paper uses the NBER TAXSIM model to project federal personal income tax liabilities as well as AMT liabilities between 2003 and 2013. The AMT has only a modest impact on the average marginal tax rates for most sources of income because some AMT taxpayers face higher marginal tax rates, and others lower tax rates, as a result of the tax. The projections show that modest increases in the AMT exclusion level have substantial effects on the number of AMT taxpayers, and that indexing the AMT parameters would reduce the number of AMT payers in 2010 by more than sixty percent. These changes would also reduce the AMT's impact on average marginal tax rates.
Many critics believed that the Tax Reform Act of 1986 (TRA86) would discourage saving. Yet person... more Many critics believed that the Tax Reform Act of 1986 (TRA86) would discourage saving. Yet personal saving rates have rebounded since 1987. This rebound might have been caused by a general decline in marginal tax rates on household saving. And we estimate, at least for the 1980s, a positive elasticity of saving with respect to the after-tax rate of return. But the tax changes alone cannot account for the recent upswing in saving rates. Furthermore, the positive saving elasticity during the 1980s is fleeting and fragile; during the entire postwar period the correlation between the after-tax rate of return and personal saving is at most zero.
National Tax Journal, Dec 1, 1991
This paper uses data from 1988 federal income tax returns, which asked taxpayers to report their ... more This paper uses data from 1988 federal income tax returns, which asked taxpayers to report their tax-exempt interest income as an information item, to analyze the distribution of tax-exempt asset holdings. More than three quarters of the tax-exempt debt held by households was held by those with marginal tax rates of 28% or more. The paper reports two measures of the average marginal tax rate on tax-exempt debt. The first measures the increase in taxes if a small fraction of each taxpayer's exempt interest income were converted to taxable interest. This weighted average of "first-dollar" marginal tax rates was 25.8%. A second calculation finds that if if all taxexempt interest were reported as taxable interest, taxes would rise by 27.6% of the increase in taxable interest. Many taxpayers who have substantial taxexempt interest receipts, but low first-dollar marginal tax rates, would be driven into higher tax brackets if the exemption were eliminated but their portfolios remained the same.
Journal of Public Economics, Mar 1, 1987
It has been hypothesized that a jurisdiction's tax structure exerts an independent effect upon th... more It has been hypothesized that a jurisdiction's tax structure exerts an independent effect upon the growth of its public sector. We test this hypothesis by examining the relationship between the growth of state general expenditure and the elasticity of tax revenues with respect to income. The work takes advantage of a very careful set of income elasticities for the personal income and sales tax systems for each state, for every year from 1978 to 1983. The main conclusion is that the data do not support the notion that the form of the tax structure exerts an independent effect on public sector growth.
National Tax Journal, Dec 1, 1987
RECENT demand for cross-section charitable giving,1 studies ownerof the and for charit ble giving... more RECENT demand for cross-section charitable giving,1 studies ownerof the and for charit ble giving,1 owneroccupied housing,2 employer-provided health insurance,3 capital gains realizations,4 and the supply of labor hours5 have been careful to use prices net of income taxes. The use of after-tax prices and incomes in behavioral equations is a direct consequence of utility maximization under a budget constraint and cannot be objected to.6 Nevertheless, when most or all of the variance in prices across observations comes from differences in marginal tax rates, questions arise about identification of structural parameters in the model. It is not the partial equilibrium nature of these regressions inevitable after all with cross sectional data but the functional dependence among the explanatory variables that causes the greatest discomfort. The variables that determine marginal tax rates, chiefly income and marital status, are quite plausible determinants of the behavior being modelled, in addition to any indirect effect they might have through the tax-price. A nonlinear dependence among the righthand side variables of a linear regression is not a source of bias provided the linear specification is known to be the correct one. Because the functional form of a demand equation cannot be known a priori this identification through functional form cannot be persuasive. In this paper we use an instrumental variable estimator to exploit sources of independent variation, which allows unbiased estimation of the tax-price elasticity under more general conditions. The estimator is applied to the demand for charitable giving. A charitable giving equation is an appropriate test for this procedure because it represents the purest case of a tax-price coefficient. That is, taxes are the sole source of variance in
Stata Technical Bulletin, 1995
Submissions to the STB, including submissions to the supporting files (programs, datasets, and he... more Submissions to the STB, including submissions to the supporting files (programs, datasets, and help files), are on a nonexclusive, free-use basis. In particular, the author grants to StataCorp the nonexclusive right to copyright and distribute the material in accordance with the Copyright Statement below. The author also grants to StataCorp the right to freely use the ideas, including communication of the ideas to other parties, even if the material is never published in the STB. Submissions should be addressed to the Editor. Submission guidelines can be obtained from either the editor or StataCorp. Copyright Statement. The Stata Technical Bulletin (STB) and the contents of the supporting files (programs, datasets, and help files) are copyright c by StataCorp. The contents of the supporting files (programs, datasets, and help files), may be copied or reproduced by any means whatsoever, in whole or in part, as long as any copy or reproduction includes attribution to both (1) the author and (2) the STB. The insertions appearing in the STB may be copied or reproduced as printed copies, in whole or in part, as long as any copy or reproduction includes attribution to both (1) the author and (2) the STB. Written permission must be obtained from Stata Corporation if you wish to make electronic copies of the insertions. Users of any of the software, ideas, data, or other materials published in the STB or the supporting files understand that such use is made without warranty of any kind, either by the STB, the author, or Stata Corporation. In particular, there is no warranty of fitness of purpose or merchantability, nor for special, incidental, or consequential damages such as loss of profits. The purpose of the STB is to promote free communication among Stata users.
Social Science Research Network, 1973
This is a test document for the NBER Online working paper system. Every user should be able to se... more This is a test document for the NBER Online working paper system. Every user should be able to search for and display bibliographic information in this format. The URL for this document is http://www.nber.org/papers/w0000. Full-Text access to working papers is offered on a subscription basis, (and free to press, US government, and developing nations). If your domain name or IP address is in the authorization file, or if you are properly logged onto this site, you should see both HTML and PDF buttons beside this text block. If the HTML button is missing, you are not in our authorization file. Please select on the Help button and choose the relevant sub-topic.<br>This paper is available without addition charge to subscribers to the NBER working paper series and persons in developing nations from <a href="http://www.&#110ber.org/papers/w0000.pdf"> the NBER. </a><br><br>Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at <a href="http://www.&#110ber.org/papers/w0000" TARGET="_blank">www.nber.org.</a><br>
Uploads
Papers by Daniel Feenberg