Three Essays in Taxation.

Behavioral Response to Taxation;Income Tax;Earned Income Tax Credit;Elasticity of Taxable Income;Average Treatment Effect;Economics;Business;Economics

Weber, Caroline E.Hines Jr., James R. ;

University of Michigan

关键词: Behavioral Response to Taxation;    Income Tax;    Earned Income Tax Credit;    Elasticity of Taxable Income;    Average Treatment Effect;    Economics;    Business;    Economics;   

Others  :  https://deepblue.lib.umich.edu/bitstream/handle/2027.42/93920/ceweber_1.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: The Illinois Digital Environment for Access to Learning and Scholarship

【 摘 要 】

Tax researchers often examine how individuals respond to marginal tax rate changes in order to assess the deadweight loss of a particular tax regime.However, the conditions under which we could estimate a causal parameter in this context, where we estimate the parameter by exploiting variation in the degree to which a tax reform affects different groups of individuals based on their individual characteristics and tax situations, has not been well understood.My first chapter analyzes the conditions under which it is possible to obtain a causal average treatment effect using pre-reform characteristics as instruments for the observed tax rate change, which I term the Fixed-Bracket Average Treatment Effect (FBATE).FBATE identifies the average treatment effect for individuals with no incentive to switch tax brackets in response to a tax reform or other shock that affects the bracket in which an individual is located. My second and third chapters use insights gained in my first chapter to empirically analyze the effect of taxation on two outcomes of interest---saving and taxable income.My second chapter analyzes the effect of the Earned Income Tax Credit (EITC) on investment income.The EITC—the largest federal cash transfer program in the U.S.—provides a substantial disincentive for individuals to save and realize investment income because EITC benefits decline as investment income rises over certain income ranges.I find that nearly 40 percent of the decline over the last two decades in the fraction of EITC recipients with savings in income-bearing accounts can be explained by changing EITC incentives.My third chapter estimates the elasticity of taxable income (ETI).This paper shows that most estimators employed in the literature fail to obtain consistent estimates of the ETI. A new method is proposed that will provide consistent estimates under testable assumptions regarding the degree of serial correlation in the error term. Using this procedure, I estimate an ETI of 1.046, which is more than twice as large as the estimates found in the most frequently cited paper on this subject (Gruber and Saez, 2002).