Miller and Scholes have shown that under certain conditions the Federal Income Tax taxes dividend income at a rate no higher than the rate on capital gains. Tabulations of actual 1977 tax returns show that the special circumstances under which this can occur apply to recipients of two and one half percent of dividend income and that no dominant role may therefore be ascribed to their hypothesis in the determination of corporate dividend policy.

This paper presents new information on the fraction of adjusted gross income, and of wages and salaries, that is reported by taxpayers in the top one half of one percent of the income distribution. This corresponds to roughly five hundred thousand households in the late 1990s. This paper relies on data from the Treasury's Individual Income Tax Model for the period 1960-1995. The definition of adjusted gross income is standardized, so that changes in the tax law do not affect the measured concentration of AGI. The results suggest that the share of AGI reported by the highest income households increased significantly between the early 1980s and the mid-1990s, with most of the increase taking place in the years immediately following the Tax Reform Act of 1986. While we find some evidence of transitory changes in the concentration of income around major tax changes, which may be the result of income retiming by high income taxpayers, re-timing does not seem to explain most of the changes since 1986.

Catastrophic medical expenses are an important economic risk facing the elderly. Little is known about the persistence of such out-of-pocket medical costs. We measure the time-series property of medical costs using information on medical deductions from a panel of tax returns. During the period of analysis, 1968-73, taxpayers could deduct medical expenses above 3 percent of income. We correct for the resulting censoring bias using multivariate Tobit estimated with a variant of the smoothed simulated maximum likelihood (SSML) method. The data suggest that the burden of out-of-pocket medical expenses is substantially larger for lower income families. Furthermore, the estimated coefficients suggest substantial time-persistence in out-of-pocket medical care costs; a $1 increase in out-of-pocket medical spending is predicted to increase future spending by an additional $2.80. These results may shed light both on the social value of catastrophic health insurance as well on aggregate saving behavior.

In recent months, the governors of several states have suffered major political embarrassments because actual revenues fell, substantially short of the predictions in their respective budgets. Such episodes focus attention on the question of whether states do a good " job of forecasting revenues. In modern economics, forecasts are evaluated on the basis of whether or not they are rational " do the forecasts optimal] y incorporate all information that is available at the tune they are made? This paper dr:vel ops a method for testing the rat i.onal t.y of state revenue forecasts, and applies it. to the aria lysi s of data from New Jersey, Massachusetts, arid Maryland. (ne of our main findtri'i; u,; that in all three states, the I orerats of own revenues are yystematically biased dowriward

When choices are made from ordered lists, individuals can exhibit biases toward selecting certain options as a result of the ordering. We examine this phenomenon in the context of consumer response to the ordering of economics papers in an e-mail announcement issued by the NBER. We show that despite the effectively random list placement, papers listed first each week are about 30% more likely to be viewed, downloaded, and subsequently cited. We suggest that a model of “skimming” behavior, where individuals focus on the first few papers in the list due to time constraints, would be most consistent with our findings.