Assessing the Welfare Impact of Tax Reform: A Case Study of the 2001 U.S. Tax Cut

24 Pages Posted: 4 May 2012

See all articles by Julie L. Hotchkiss

Julie L. Hotchkiss

Federal Reserve Bank of Atlanta; Georgia State University - Department of Economics

Robert E. Moore

Georgia State University

Fernando Rios‐Avila

Bard College - The Levy Economics Institute

Multiple version iconThere are 2 versions of this paper

Date Written: June 2012

Abstract

This paper implements a relatively simple methodological approach to estimate the impact on family welfare of a specific tax reform. The measured impact can differ greatly from simple marginal tax rate comparisons, and conclusions about the distribution of the welfare impact can vary depending on the basis of comparison. For example, absolute welfare gains from the 2001 U.S. tax reform were concentrated among the highest and lowest income families, whereas welfare gains measured as a share of pre‐tax income are found to be nearly monotonically declining in income.

Keywords: household welfare, joint labor supply, tax reform

JEL Classification: H23, H31, J22

Suggested Citation

Hotchkiss, Julie L. and Moore, Robert E. and Rios‐Avila, Fernando, Assessing the Welfare Impact of Tax Reform: A Case Study of the 2001 U.S. Tax Cut (June 2012). Review of Income and Wealth, Vol. 58, Issue 2, pp. 233-256, 2012. Available at SSRN: https://ssrn.com/abstract=2050783 or http://dx.doi.org/10.1111/j.1475-4991.2012.00493.x

Julie L. Hotchkiss (Contact Author)

Federal Reserve Bank of Atlanta ( email )

Research Department
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Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

Robert E. Moore

Georgia State University

Fernando Rios‐Avila

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504-5000
United States

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