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Tax cuts for whom? Heterogeneous effects of income tax changes on growth and employment

Author(s): Zidar, Owen M.

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Abstract: © 2019 by The University of Chicago. All rights reserved. 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. Variation in the income distribution across US 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 percent on employment growth is small.
Publication Date: 8-May-2019
Citation: Zidar, O. (2019). Tax cuts for whom? Heterogeneous effects of income tax changes on growth and employment. Journal of Political Economy, 127 (3), 1437 - 1472. doi:10.1086/701424
DOI: doi:10.1086/701424
ISSN: 0022-3808
EISSN: 1537-534X
Pages: 1437 - 1472
Type of Material: Journal Article
Journal/Proceeding Title: Journal of Political Economy
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.



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