The Effect of Tax Expenditures on Automatic Stabilizers: Methods and Evidence
21 Pages Posted: 11 Aug 2017
There are 2 versions of this paper
The Effect of Tax Expenditures on Automatic Stabilizers: Methods and Evidence
Journal of Empirical Legal Studies 14(3):548-568, 2017
Number of pages: 35
Posted: 07 Jan 2016
Last Revised: 11 Sep 2017
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Date Written: September 2017
Abstract
We study the effect of tax expenditures on the stabilizing power of the tax system. We propose a micro‐simulation strategy that exploits links that we identify between automatic stabilizers, tax expenditures, and effective marginal tax rates. Using U.S. tax return micro data 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 percent and 3.9 percent, respectively.
Suggested Citation: Suggested Citation
Kingi, Hautahi and Rozema, Kyle, The Effect of Tax Expenditures on Automatic Stabilizers: Methods and Evidence (September 2017). Journal of Empirical Legal Studies, Vol. 14, Issue 3, pp. 548-568, 2017, Available at SSRN: https://ssrn.com/abstract=3016682 or http://dx.doi.org/10.1111/jels.12155
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