Do Household Finances Constrain Unconventional Fiscal Policy?
Scott R. Baker, Northwestern University and NBER
Lorenz Kueng, Northwestern University and NBER
Leslie McGranahan, Federal Reserve Bank of Chicago
Brian T. Melzer, Dartmouth College

When the zero lower bound on nominal interest rate binds, monetary policy makers may lack traditional tools to stimulate aggregate demand. Baker, Kueng, McGranahan, and Melzer investigate whether "unconventional" fiscal policy, in the form of pre-announced consumption tax changes, has the potential to meaningfully shift durables purchases intertemporally and how it is affected by consumer credit. In particular, they test whether car sales react in anticipation of future sales tax changes, leveraging 57 pre-announced changes in state sales tax rates from 1999-2017. The researchers find evidence for substantial tax elasticities, with car sales rising by over 8% in the month before a 1% increase in the sales tax rate. Responses are heterogeneous across households and sensitive to supply of credit. Consumers with high credit risk scores are most able to pull purchases forward. At the same time, other effects such as customer composition and attention lead to an even larger tax elasticity during recessions, despite these credit frictions. The researchers discuss policy implications and the likely magnitudes of tax changes necessary for any substantive long-term responses.


In addition to the conference paper, the research was distributed as NBER Working Paper w25212, which may be a more recent version.

The True Cost of Social Security
Alexander W. Blocker, Harvard University
Laurence J. Kotlikoff, Boston University and NBER
Stephen A. Ross, Massachusetts Institute of Technology
Sergio Villar Vallenas, Boston University

Implicit government obligations represent the lion's share of government liabilities in the U.S. and many other countries. Yet these liabilities are rarely measured, let alone properly adjusted for their risk. Blocker, Kotlikoff, Ross, and Villar Vallenas show, by example, how modern asset pricing can be used to value implicit fiscal debts taking into account their risk properties. The example is the U.S. Social Security System's net liability to working-age Americans. Marking this debt to market makes a big difference. Its market value is 86 percent higher than the Social Security trustees' valuation method suggests.


In addition to the conference paper, the research was distributed as NBER Working Paper w14427, which may be a more recent version.

Independent Taxation, Horizontal Equity, and Return-Free Filing
Jeffrey B. Liebman, Harvard University and NBER
Tax Equivalences and Their Implications
Alan J. Auerbach, University of California, Berkeley and NBER

In economic analyses of the effects of tax policies, one commonly encounters discussions of the equivalence of apparently different policies, where equivalence is defined as the policies having the same impact on fundamental economic outcomes. These related tax policies may differ in many respects, including (1) the side of a market on which they are applied, (2) the form in which they are imposed (e.g., as a unit or ad valorem tax, on a tax inclusive or tax exclusive basis, etc.), (3) whether they are imposed on households or firms, (4) the market in which they are directly imposed, (5) their timing, and (6) whether behavioral adjustments are involved in the equivalence. These differences give rise to conditions under which the equivalences may break down, because of several factors, including (1) differences in salience, (2) market imperfections, such as liquidity constraints, price rigidity or imperfect competition, (3) differences in information requirements and the costs of tax administration and enforcement, and (4) government accounting rules. Auerbach draws out the key issues that relate to tax equivalences, using several illustrations from important instances of such equivalences that span different areas of taxation, with many of these illustrations relating to the taxation of capital income. Recognition of equivalences and the ways in which they may fail to hold is important both for positive analysis (e.g., the political reasons for choosing one approach over another) and for normative analysis (to determine which approach may be a more effective way of implementing a policy).


In addition to the conference paper, the research was distributed as NBER Working Paper w25158, which may be a more recent version.

Tax Reform Made Me Do It!
Michelle Hanlon, Massachusetts Institute of Technology
Jeffrey L. Hoopes, University of North Carolina
Joel Slemrod, University of Michigan and NBER

Hanlon, Hoopes, and Slemrod examine corporations' actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). Specifically, they examine four different outcomes -- bonuses (or other actions that benefit workers), announcements of new investments, share repurchases, and dividend announcements. The researchers find that 4% of public firms in our sample announced in Q1 2018 they would pay some portion of their tax savings toward workers. In terms of investment, they find that 22% of the S&P 500 firms in the sample mentioned in earnings conference calls that they would increase investment because of the TCJA. The researchers find a general increase in share repurchases following the passage of the TCJA, but the increase is extremely concentrated in a small number of firms. The researchers find that only nine firms that announced a new share repurchase plan explicitly attributed the new plan to the TCJA. In regression analysis, the researchers find that both political and economic variables explain TCJA-linked announcements. The analysis suggests that firms with greater expected tax savings from the TCJA are those most likely to announce payments to workers and plans to increase investment. Firms with a Political Action Committee that donates more to Republican candidates are also more likely to announce benefits to employees.


In addition to the conference paper, the research was distributed as NBER Working Paper w25283, which may be a more recent version.


Below is a list of conference attendees.
Andrew Austin, Congressional Research Service
Nathan Born
Ike Brannon, Capital Policy Analytics
Edith Brashares, Department of the Treasury
David Brazell, Department of the Treasury
Nicholas Bull, Joint Committee on Taxation
Kathleen Burke, Congressional Budget Office
Aaron Butz, Congressional Budget Office
David Cashin, Federal Reserve Board
James Cilke, Joint Committee on Taxation
Adam Cole, Department of the Treasury
Lydia B. DePillis, ProPublica
Tim Dowd, Joint Committee on Taxation
Alex J. Durante, Tax Foundation
Brian Galle, Georgetown University
George Guttman, Government Accountability Office
Sameh Habib, Joint Committee on Taxation
Janet Holtzblatt, Tax Policy Center
Craig Johnson, Department of the Treasury
John Kitchen, Congressional Budget Office
Ben Klemens, Department of the Treasury
Sally Kwak, Joint Committee on Taxation
Paul Landefeld, Joint Committee on Taxation
Junghoon Lee, Congressional Budget Office
Allen Lerman, retired
Sean Lowry, Congressional Research Service
Nancy Lutz, National Science Foundation
Thornton Matheson, Consultant
Jamie McGuire, Joint Committee on Taxation
Kathleen McQueeney, General Accounting Office
Baynard Meiser, Congressional Budget Office
Corbin Miller, U.S. Department of the Treasury
Thomas Miller, American Enterprise Institute
Rachel Moore, Joint Committee on Taxation
Edward Nannenhorn, Government Accountability Office
Paul R. Organ, University of Michigan
David Paris, Internal Revenue Service
Moon Parks, Government Accountability Office
Brandon Pecoraro, Joint Committee on Taxation
Ronald Promboin, retired
Zachary Richards, Joint Committee on Taxation
Richard Rubin, "Wall Street Journal"
Molly Saunders-Scott, Congressional Budget Office
Roberto Schatan, International Monetary Fund
Donald F. Schneider, Cornerstone Macro
John Seliski, Congressional Budget Office
Maxim Shvedov, AARP
Naveen Singhal, Congressional Budget Office
Ellen Steele, Congressional Budget Office
Lori Stuntz, Ernst & Young, LLP
Kathleen Toma, Joint Committee on Taxation
Alan Viard, American Enterprise Institute
Michael E. Weber, Internal Revenue Service
Elwood White, Government Accountability Office
Robert Whitten, Department of the Treasury
Jeffrey Wrase, Senate Finance Committee
Lin Xu, Joint Committee on Taxation

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