Tax Cuts for Whom? Heterogeneous Effects of Tax Changes on Growth and Employment

Citation:

Zidar, Owen. “Tax Cuts for Whom? Heterogeneous Effects of Tax Changes on Growth and Employment”. Journal of Political Economy (Forthcoming). Web.
Manuscript.pdf5.38 MB

Date Published:

2018

Abstract:

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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NBER WP 21035

Last updated on 04/28/2018