Seth H Giertz | University of Texas at Dallas (original) (raw)

Papers by Seth H Giertz

and anonymous referees for helpful comments and discussions, and Jonathan Adams and Caroline Webe... more and anonymous referees for helpful comments and discussions, and Jonathan Adams and Caroline Weber for invaluable research assistance. Financial support from NSF Grant SES-0134946 is gratefully acknowledged. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

RePEc: Research Papers in Economics, 2018

Local and state governments attempt to lessen after-tax income inequality via progressive taxatio... more Local and state governments attempt to lessen after-tax income inequality via progressive taxation. Migration responses of capital and labor undermine such attempts. Location theory predicts that cross-state migration will continue until the redistributive effects from taxation are fully capitalized into gross wages leaving after-tax wages unchanged. Empirical evidence has not reached a consensus on this issue. At one extreme, Feldstein and Wrobel (1998) report evidence of full tax capitalization for US states. At the other extreme, Leigh (2008) reports very little to no wage capitalization. We revisit this question by creating a pseudo panel from CPS data spanning years 1997 to 2015. Our “best” estimate is that pre-tax wages adjust in response to redistributive state and local taxes, negating roughly 50 percent of effect compared to counterfactual with no behavioral responses.

RePEc: Research Papers in Economics, Dec 1, 2004

This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical... more This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical studies examining the U.S. tax changes of 1981, 1986, 1990, and 1993 and the bracket creep of the late 1970s and early 1980s. The paper first provides background on the importance of the elasticity of taxable income both for forecasting income tax revenue and for assessing the efficiency implications of tax rate changes. It then discusses the major methodological issues and obstacles before delving into the literature. The paper emphasizes the different methodologies employed and the sensitivity of estimates to an array of factors, including sample selection, the tax reform under examination, and econometric techniques (or model specification). Although it recognizes advances in the literature in recent years, the paper concludes that responses to tax rate changes are far from fully understood and that there is much to be gained from continued research on this topic. 1. Feldstein shows that deadweight loss =-0.5 $ tax_rate $ (1-tax_rate)-1 , taxable_income $ taxable_income. However, there are exceptions when a breakdown of the response can add insight into the efficiency implications. For example, suppose tax rates rise and, in response, taxable income falls, but a portion of that drop in taxable income is due to increased charitable contributions (and suppose those charities produce positive externalities). Or, suppose that a tax increase is used to finance an underprovided public good. In instances such as those, where external costs or benefits are present, assessing efficiency implications is more complex.

RePEc: Research Papers in Economics, Dec 1, 2004

This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical... more This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical studies examining the U.S. tax changes of 1981, 1986, 1990, and 1993 and the bracket creep of the late 1970s and early 1980s. The paper first provides background on the importance of the elasticity of taxable income both for forecasting income tax revenue and for assessing the efficiency implications of tax rate changes. It then discusses the major methodological issues and obstacles before delving into the literature. The paper emphasizes the different methodologies employed and the sensitivity of estimates to an array of factors, including sample selection, the tax reform under examination, and econometric techniques (or model specification). Although it recognizes advances in the literature in recent years, the paper concludes that responses to tax rate changes are far from fully understood and that there is much to be gained from continued research on this topic. 1. Feldstein shows that deadweight loss =-0.5 $ tax_rate 2 $ (1-tax_rate)-1 , taxable_income $ taxable_income. However, there are exceptions when a breakdown of the response can add insight into the efficiency implications. For example, suppose tax rates rise and, in response, taxable income falls, but a portion of that drop in taxable income is due to increased charitable contributions (and suppose those charities produce positive externalities). Or, suppose that a tax increase is used to finance an underprovided public good. In instances such as those, where external costs or benefits are present, assessing efficiency implications is more complex.

Social Science Research Network, 2022

Advocates of Medicaid expansion argue that federal Medicaid assistance to states fosters economic... more Advocates of Medicaid expansion argue that federal Medicaid assistance to states fosters economic activity, generating positive local multiplier effects. Furthermore, during economic downturns, Congress regularly tweaks federal match rates for state Medicaid spending-including during the COVID-19 public health emergency-in order to assist states. Despite heavy reliance on Medicaid funding formulas, identifying the economic effect of these federal transfers has proved challenging. This is because federal Medicaid assistance (to states) is endogenous, since funding levels are correlated with unobserved factors driving state economic activity. To address this concern, we construct an instrument based on a slope discontinuity in the federal matching rate for state Medicaid spending. Using state-level panel data from 1990 to 2013, we find that federal Medicaid assistance does stimulate economic activity, but the implied cost per job created is quite high and the multiplier is well below 1. Despite modest economic effects over the entire sample period, we find that federal Medicaid assistance provided powerful fiscal stimulus to states after the Great Recession when the implied multiplier shot up to 1.5.

This paper develops a simulation model in order to examine the effectiveness of state attempts at... more This paper develops a simulation model in order to examine the effectiveness of state attempts at redistribution under a variety of migration elasticity assumptions. Key outputs from the simulation include the impact of tax-induced migration on state revenues, excess burden, and fi scal externalities. With modest migration elasticities, the costs of state-level redistribution are substantial, but state action may still be preferred to a federal policy that is at odds with preferences of a state’s citizens. At higher migration elasticities, the costs of state action can be tremendous. Overall excess burden is greater, but this is dominated by horizontal fi scal externalities. Horizontal fi scal externalities represent a cost to the state pursuing additional redistribution, but not a cost at the national level.

CBO Working Paper 2006-03 Congressional Budget Office working papers in this series are prelimina... more CBO Working Paper 2006-03 Congressional Budget Office working papers in this series are preliminary and are circulated to stimulate discussion and critical comment. Those papers are not subject to the Congressional Budget Office’s formal review and editing processes. The analysis and conclusions expressed in them are those of the authors and should not be interpreted as those of the Congressional Budget Office. References in publications should be cleared with the authors. Papers in the series can be obtained at www.cbo.gov/publications.

This Article is brought to you for free and open access by the Economics Department at DigitalCom... more This Article is brought to you for free and open access by the Economics Department at DigitalCommons@University of Nebraska- Lincoln. It has

Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to enco...

This paper critically surveys the large and growing literature estimating the elasticity of taxab... more This paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates (ETI) using tax return data. First, we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis. We discuss what other parameters should be estimated when the elasticity is not a sufficient statistic. Second, we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the United States to illustrate those issues. Third, we provide a critical discussion of most of the taxable income elasticities studies to date, both in the United States and abroad, in light of the theoretical and empirical framework we laid out. Finally, we discuss avenues for future research.

Technical papers in this series are preliminary and are circulated to stimulate discussion and cr... more Technical papers in this series are preliminary and are circulated to stimulate discussion and critical comment. These papers are not subject to the Congressional Budget Office’s formal review and editing processes. The analyses and conclusions expressed in them are those of the authors and should not be interpreted as those of the Congressional Budget Office. References in publications should be cleared with the authors. Papers in this series can be obtained at

Economic Growth eJournal, 2013

The report examines tax policy uncertainty, noting that academic literature on tax uncertainty ha... more The report examines tax policy uncertainty, noting that academic literature on tax uncertainty has failed to address so-called rent seeking. The authors build on the work of Baumol (1990), who contends that it is not just the degree of entrepreneurship that is central to economic growth but also the allocation of entrepreneurship between constructive activities and unproductive or destructive ones. The authors conclude that fundamental tax reform is an important step in reducing tax policy uncertainty. However, unless reform is specifically designed to be enduring it will be undone through rent seeking.

This paper examines the elasticity of taxable income with special focus on income controls design... more This paper examines the elasticity of taxable income with special focus on income controls designed to control for divergence in the income distribution and mean reversion. Additional emphasis is placed on the difference between short-run and longer-run responses to tax rate changes. Several panel techniques are applied to tax return data for years 1991 to 1997, followed by a cross-section analysis covering the same period. For each panel regression, an innovative inverted panel regression framework is employed to test the efficacy of the controls for mean reversion apart from controls for divergence in the income distribution. Finally, cross-section (and repeated cross-section) regressions are estimated for comparison. A major finding from comparing estimates from the standard and inverted panels is that even some of the more sophisticated techniques likely fail to adequately control for mean reversion at the top of the income distribution. Furthermore, the residual impact from mea...

This paper examines alternative methodologies for measuring responses to the 1990 and 1993 federa... more This paper examines alternative methodologies for measuring responses to the 1990 and 1993 federal tax increases. The methodologies build on those employed by Gruber and Saez (2002), Carroll (1998) and Auten and Carroll (1999). Internal Revenue Service tax return data for the project are from the Statistics of Income, which heavily oversamples high-income filers. Special attention is paid to the importance of sample income restrictions and methodology. Estimates are broken down by income group to measure how responses to tax changes vary by income. In general, estimates are quite sensitive to a number of different factors. Using an approach similar to Carroll’s yields elasticity of taxable income (ETI) estimates as high as 0.54 and as low as 0.03, depending on the income threshold for inclusion into the sample. Gruber and Saez’s preferred specification yields estimates for the 1990s of 0.30. Yet another approach compares behavior only in the end years, before and after tax changes, ...

The fiscal cliff, policy uncertainty and tax reform" (2012). Economics Department Faculty Pu... more The fiscal cliff, policy uncertainty and tax reform" (2012). Economics Department Faculty Publications. Paper 83.

The focus of this paper is the O ce of Federal Housing Oversight's house price stress test (t... more The focus of this paper is the O ce of Federal Housing Oversight's house price stress test (termed ALMO) designed to assess the economic strength of Fannie Mae and Freddie Mac and, if necessary, to trigger remedial action in order to avert a crisis. We assess whether the ALMO stress test was an adequate representation of an extremely weak housing market, given the best available information leading up to the Great Recession of 2007-2009. A variety of regression speci cations are estimated and a microsimulation model developed to estimate the severity of low probability events (i.e., severe house price declines). We illustrate the complexity and subjective nature of the process used to generate a plausible house price stress test scenario. A major nding is that the ALMO stress test scenario severely understated (possibly by 50 percent or more) what an updated statistical process would have suggested. Part of this stems from idiosyncrasies related to the construction and implement...

This paper presents applications of variants of a differencing methodology to Internal Revenue Se... more This paper presents applications of variants of a differencing methodology to Internal Revenue Service tax records in order to estimate taxable income elasticities for the 1990s. Estimates are systematically examined by applying a number of sensitivity tests. Estimates are produced after altering the: (1) time interval over which observational-level behavior is measured; (2) income restrictions on the sample; (3) choice of control variables; and (4) weighting scheme used in the regressions. In general, estimates are quite sensitive to a number of different factors. In contrast to some of the literature, estimates are larger when behavior is measured over 3-year intervals as opposed to over 1-year intervals, suggesting small transitory responses to tax changes but larger longer-term responses. When including the richest set of income controls, income-weighted short-term elasticity estimates (based on 1-year differencing) range from 0 to 0.19. Similarly estimated longer-term elasticit...

RePEc: Research Papers in Economics, 2018

RePEc: Research Papers in Economics, Dec 1, 2004

This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical... more This paper reviews the literature on taxable-income elasticities, focusing primarily on empirical studies examining the U.S. tax changes of 1981, 1986, 1990, and 1993 and the bracket creep of the late 1970s and early 1980s. The paper first provides background on the importance of the elasticity of taxable income both for forecasting income tax revenue and for assessing the efficiency implications of tax rate changes. It then discusses the major methodological issues and obstacles before delving into the literature. The paper emphasizes the different methodologies employed and the sensitivity of estimates to an array of factors, including sample selection, the tax reform under examination, and econometric techniques (or model specification). Although it recognizes advances in the literature in recent years, the paper concludes that responses to tax rate changes are far from fully understood and that there is much to be gained from continued research on this topic. 1. Feldstein shows that deadweight loss =-0.5 $ tax_rate 2 $ (1-tax_rate)-1 , taxable_income $ taxable_income. However, there are exceptions when a breakdown of the response can add insight into the efficiency implications. For example, suppose tax rates rise and, in response, taxable income falls, but a portion of that drop in taxable income is due to increased charitable contributions (and suppose those charities produce positive externalities). Or, suppose that a tax increase is used to finance an underprovided public good. In instances such as those, where external costs or benefits are present, assessing efficiency implications is more complex.

Social Science Research Network, 2022

Economic Growth eJournal, 2013