Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment
This paper investigates how tax changes for different income groups affect aggregate economic activity. I construct a measure of who received (or paid for) tax changes in the postwar period using tax return data from NBER's TAXSIM. I aggregate each tax change by income group and state. Variation in the income distribution across U.S. states and federal tax changes generate variation in regional tax shocks that I exploit to test for heterogeneous effects. I find that the positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups, and that the effect of tax cuts for the top 10% on employment growth is small.
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Copy CitationOwen M. Zidar, "Tax Cuts For Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment," NBER Working Paper 21035 (2015), https://doi.org/10.3386/w21035.
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Published Versions
Owen Zidar, 2019. "Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment," Journal of Political Economy, vol 127(3), pages 1437-1472.
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