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

21 Pages Posted: 11 Aug 2017

See all articles by Hautahi Kingi

Hautahi Kingi

Cornell University, Department of Economics, Students

Kyle Rozema

University of Chicago - Law School

Multiple version iconThere are 2 versions of this paper

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

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

Hautahi Kingi (Contact Author)

Cornell University, Department of Economics, Students ( email )

Ithaca, NY
United States

HOME PAGE: http://hautahikingi.com/

Kyle Rozema

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

HOME PAGE: http://www.kylerozema.com

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