Working Paper: NBER ID: w1163
Authors: Robert Moffitt; Michael Rothschild
Abstract: We explore the interaction between two facts. The first is that income is variable; the second is that the tax and transfer system transforms before tax income into after tax income in highly non-linear ways. The effect is to penalize (and reward) income variability in a manner which is both substantial and capricious.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EITC (H26) | labor market participation (J29) |
| EITC (H26) | risk-taking behavior among low-income individuals (I12) |
| tax system (H20) | income variability (D31) |
| nonlinear tax system (H29) | labor market participation (J29) |
| progressive tax system (H29) | penalizes income variability (D31) |
| regressive tax system (H29) | rewards income variability (J33) |
| tax system curvature (H21) | after-tax income variability (H31) |
| tax system effect on income variability (H31) | risk-taking behavior (D91) |