Working Paper: NBER ID: w24175
Authors: Ugo Troiano
Abstract: I present new quasi-experimental evidence on the relationship between tax policies and the distribution of income. I focus on the twentieth century United States, and on the personal income tax, since its inception. I study three major policy events that, as the existing literature shows, significantly raised the revenues from the income tax: the introduction of the state personal income tax, the introduction of tax withholding together with third-party reporting, and the intergovernmental agreements between the federal and state governments to coordinate tax auditing efforts. All the three policies were introduced in a staggered fashion and increased tax revenues, but had different fiscal consequences. Despite this, I find that income inequality raised after all the tax policy events. The result is robust to different measures of economic inequality and econometric specifications.
Keywords: Taxes; Economic Inequality; Personal Income Tax
JEL Codes: D63; H23; N32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax policy reforms (H29) | income inequality (D31) |
| state personal income tax (H71) | Atkinson index (C43) |
| tax withholding and third-party reporting (H26) | Atkinson index (C43) |
| intergovernmental agreement for audit information exchange (F53) | Atkinson index (C43) |