The Effect of Tax Expenditures on Automatic Stabilizers: Methods and Evidence

Journal of Empirical Legal Studies 14(3):548-568, 2017

35 Pages Posted: 7 Jan 2016 Last revised: 11 Sep 2017

See all articles by Hautahi Kingi

Hautahi Kingi

Cornell University, Department of Economics, Students

Kyle Rozema

Washington University in St. Louis - School of Law

Date Written: June 1, 2017

Abstract

We study the effect of tax expenditures on the stabilizing power of the tax system. We propose a microsimulation strategy which exploits links that we identify between automatic stabilizers, tax expenditures, and effective marginal tax rates. Using United States tax return microdata from 2000 to 2010, we estimate that, on average, the mortgage interest deduction and the charitable contributions deduction decreased the ability of the tax system to absorb fluctuations in aggregate consumption by an average of 7.4% and 3.9%.

Keywords: Tax Expenditures, Automatic Stabilizers

JEL Classification: K34, H24, H31, E62

Suggested Citation

Kingi, Hautahi and Rozema, Kyle, The Effect of Tax Expenditures on Automatic Stabilizers: Methods and Evidence (June 1, 2017). Journal of Empirical Legal Studies 14(3):548-568, 2017, Available at SSRN: https://ssrn.com/abstract=2711499 or http://dx.doi.org/10.2139/ssrn.2711499

Hautahi Kingi

Cornell University, Department of Economics, Students ( email )

Ithaca, NY
United States

HOME PAGE: http://hautahikingi.com/

Kyle Rozema (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

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