DORMANT PAPERS
(2019) Simulating the 199A Deduction for Pass-through Owners
coauthors: Lucas Goodman, Katie Lim, and Bruce Sacerdote
We analyze the new Section 199A deduction for pass-through income using a representative sample of administrative data from tax year 2016. We identify the taxpayers who would have benefited from the pass-through deduction had it applied in 2016. The analysis uses taxpayers' reported income, abstracting from behavioral responses, and applies key aspects of 2018 tax code. We do not attempt to model any potential economic growth spurred by 199A, nor do we model the economic incidence of the deduction. The estimated tax savings from the deduction, measured in 2018 dollars, is $34.5 billion. The majority of the beneficiaries of the deduction are in the bottom 80 percent of the income distribution. However, 60 percent of pass-through income, and 72 percent of the statutory benefit of the passthrough deduction, accrues to taxpayers in the top five percent of adjusted gross income (above roughly $208,000). Without the 199A guardrails, we estimate that this group would receive 83 percent of the statutory benefit.
(2018) The Absence of Income Effects at the Onset of Child Tax Benefits
coauthors: Jake Mortenson, Heidi Schramm, and Lin Xu
We study the effects of quasi-random variation in unearned income on labor force participation, earnings, business income, capital gains realizations, retirement savings, and unemployment compensation. To identify these income effects, we exploit an age discontinuity in the federal tax system: parents whose children are born in December of year t-1 can claim child-related tax benefits for that year, whereas otherwise-similar parents whose children are born in January of year t cannot. We use a panel of administrative tax data comprised of the universe of married households with a child born in December or January in years 2001 through 2013. Over this period, the average child tax benefit was about $1,800. Using a regression discontinuity research design, we find approximately zero treatment effects on the intensive and extensive margin for all outcome variables studied. Our results are consistent with precise zero income effects and suggest that households do not learn about (and respond to) child tax benefits in the first year they are claimed.
(2016) Optimal Taxation of Internalities: The Role of Market Incentives
This paper analyzes the optimal taxation of goods when consumers fail to maximize their own utility, imposing internalities on themselves. This can happen due to imperfect information, cognitive bias, or lack of willpower, among other causes. I relax two ubiquitous assumptions found in other work on this topic by studying imperfect competition and the incentive firms have to de-bias consumers. Contrary to standard results, I find that (i) internality correction, even if costless, is not always desirable; (ii) optimal tax rates are generally not equal to marginal internalities; and (iii) firm de-biasing incentives attenuate the optimal internality tax or subsidy.