Income taxation of U.S. households: Facts and parametric estimates

Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo

doi:10.1016/j.red.2014.01.003

Cited by 161 publications

(150 citation statements)

References 26 publications

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“…Table B.2). The resulting ξ is 0.692, implying an effective top marginal federal income tax rate of about 24.2 percent (35% × 0.692) which is in line with the estimates for married households by Guner et al (2014). We choose the linear income tax rate, τ s I such that the government balances its budget at the stationary equilibrium of the model economy.…”

Section: Government Policy Parametersmentioning

confidence: 63%

Aggregate and Distributional Effects of Increasing Taxes on Top Income Earners

Brüggemann

Yoo

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze the macroeconomic implications of increasing the top marginal income tax rate using a dynamic general equilibrium framework with heterogeneous agents and a fiscal structure resembling the actual U.S. tax system. The wealth and income distributions generated by our model replicate the empirical ones. In two policy experiments, we increase the statutory top marginal tax rate from 35 to 70 percent and redistribute the additional tax revenue among households, either by decreasing all other marginal tax rates or by paying out a lump-sum transfer to all households. We find that increasing the top marginal tax rate decreases inequality in both wealth and income but also leads to a contraction of the aggregate economy. This is primarily driven by the negative effects that the tax change has on top income earners. The aggregate gain in welfare is sizable in both experiments mainly due to a higher degree of distributional equality.

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Section: Government Policy Parametersmentioning

confidence: 63%

Aggregate and Distributional Effects of Increasing Taxes on Top Income Earners

Brüggemann

Yoo

2015

SSRN Journal

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“…As discussed before, this simple tax function fits very well the U.S. tax code, and the parameter γ can be clearly interpreted as the progressivity of the tax system. We set γ = 0.10, which is a value in line with the estimates in Feenberg, Ferriere, Navarro, and Vardishvili (2018), as well as Heathcote, Storesletten, and Violante (2014) and Guner, Kaygusuz, and Ventura (2012). The value of λ is computed so that the government's budget constraint is met in equilibrium.…”

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confidence: 99%

“…As such, this measure accurately tracks changes 8 Notice that when γ = 0, the tax rate is exactly 1 − λ. 9 This tax function was initially proposed by Feldstein (1969) and has been recently used by Heathcote, Storesletten, and Violante (2014) and Guner, Kaygusuz, and Ventura (2014) among others. These papers argue that the tax function fits particularly well the U.S. federal income tax code in recent years.…”

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confidence: 99%

The Heterogeneous Effects of Government Spending: It’s All About Taxes

Ferrière¹,

Navarro

2018

internationalfinance

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This paper investigates how government spending multipliers depend on the distribution of taxes across households. We exploit historical variations in the financing of spending in the U.S. since 1913 to show that multipliers are positive only when financed with more progressive taxes, and zero otherwise. We rationalize this finding within a heterogeneous-household model with indivisible labor supply. The model results in a lower labor responsiveness to tax changes for higher-income earners. In turn, spending financed with more progressive taxes induces a smaller crowding-out, and thus larger multipliers. Finally, we provide evidence in support of the model's cross-sectional implications.

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“…Guner et al (2014) find that average tax rates on state and local income taxes are essentially flat as a function of household income, ranging from about 4% at the central income quintile to about 5.3%…”

Section: Parameter Valuesmentioning

confidence: 98%

Heterogeneity and Government revenues: Higher taxes at the top?

Guner

Lopez-Daneri

Ventura

2016

Journal of Monetary Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu We evaluate the effectiveness of a more progressive tax scheme in raising government revenues. We develop a life-cycle economy with heterogeneity and endogenous labor supply. Households face a progressive income tax schedule, mimicking the Federal Income tax, and flat-rate taxes that capture payroll, state and local taxes and the corporate income tax. We parameterize this model to reproduce aggregate and cross-sectional observations for the U.S. economy, including the shares of labor income for top earners. We find that a tilt of the Federal income tax schedule towards high earners leads to small increases in revenues which are maximized at an effective marginal tax rate of about 36.9% for the richest 5% of households -in contrast to a 21.7% marginal rate in the benchmark economy. Maximized revenue from Federal income taxes is only 8.4% higher than it is in the benchmark economy, while revenues from all sources increase only by about 1.6%. The room for higher revenues from more progressive taxes is even lower when average taxes are higher to start with. We conclude that these policy recommendations are misguided if the aim is to exclusively raise government revenue. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SJEL Classification: E6, H2

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Income taxation of U.S. households: Facts and parametric estimates

Cited by 161 publications

References 26 publications

Aggregate and Distributional Effects of Increasing Taxes on Top Income Earners

Aggregate and Distributional Effects of Increasing Taxes on Top Income Earners

The Heterogeneous Effects of Government Spending: It’s All About Taxes

Heterogeneity and Government revenues: Higher taxes at the top?

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