TY  - JOUR
AU  - Hausman,Jerry A.
AU  - Poterba,James M.
TI  - Household Behavior and the Tax Reform Act of 1986
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2120
PY  - 1988
Y2  - February 1988
UR  - http://www.nber.org/papers/w2120
L1  - http://www.nber.org/papers/w2120.pdf
N1  - Author contact info:
Jerry A. Hausman
Department of Economics
MIT, Room E52-271A
50 Memorial Drive
Cambridge, MA  02139
Tel: 617/253-3644
Fax: 617/253-1330
E-Mail: jhausman@mit.edu

James M. Poterba
Department of Economics
MIT, E52-350
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-6673
Fax: 617/258-7804
E-Mail: poterba@nber.org
M2  - featured in NBER digest on 1987-03-01
AB  - This paper evaluates the effects of the 1986 Tax Reform Act on household labor supply and savings. It describes the tax bill's effects on incentives to work and to save, and uses recent econometric estimates of labor supply and savings elasticities to describe the reform's impact on household behavior. Two factors lead us to conclude that the new law will have small aggregate effects. First, most households experience only small changes in their marginal tax rates. Forty-one percent of the taxpaying population will face marginal tax rates as high, or higher, under the new law as under the previous tax code. Only eleven percent of taxpayers receive marginal tax rate reductions of ten percentage points or more. Second, plausible estimates of both the labor supply and savings elasticities suggest that even for those households that receive rate reductions, behavioral changes will be small. Our analysis suggests that the tax reform will increase labor supply by about one percent, and slightly reduce private savings.
ER  -