Abstract We conduct a comparative welfare analysis of 133 historical policy changes over the past half-century in the United States, focusing on policies in social insurance, education and job training, taxes and cash transfers, and in-kind transfers. For each policy, we use existing causal estimates to calculate the benefit that each policy provides its recipients (measured as their willingness to pay) and the policy’s net cost, inclusive of long-term effects on the government’s budget. We divide the willingness to pay by the net cost to the government to form each policy’s Marginal Value of Public Funds, or its ``MVPF''. Comparing MVPFs across policies provides a unified method of assessing their effect on social welfare. Our results suggest that direct investments in low-income children’s health and education have historically had the highest MVPFs, on average exceeding 5. Many such policies have paid for themselves as the government recouped the cost of their initial expenditures through additional taxes collected and reduced transfers. We find large MVPFs for education and health policies among children of all ages, rather than observing diminishing marginal returns throughout childhood. We find smaller MVPFs for policies targeting adults, generally between 0.5 and 2. Expenditures on adults have exceeded this MVPF range in particular if they induced large spillovers on children. We relate our estimates to existing theories of optimal government policy, and we discuss how the MVPF provides lessons for the design of future research.

Abstract We estimate the returns to IRS audits of taxpayers across the income distribution. We find an additional $1 spent auditing taxpayers above the 90th income percentile yields more than $12 in revenue, while audits of below-median income taxpayers yield $5. We construct our estimates by drawing from comprehensive internal accounting information and audit-level enforcement logs. We begin by estimating the average initial return to all audits of U.S. taxpayers filing in tax years 2010–2014. On average, $1 in audit spending initially raises $2.17 in revenue. Audits of high-income taxpayers are more costly, but the additional revenue raised more than offsets the costs. Audits of the 99–99.9th percentile have a 3.2:1 initial return; audits of the top 0.1% return 6.3:1. We then exploit the 40% audit reduction between tax years 2010 and 2014 to examine the returns to marginal audits. We find they exceed the returns to average audits. Revenues remain relatively unchanged, but marginal costs fall below average costs due to economies of scale. Next, we use randomly selected audits to examine the effect of an initial audit on future revenue. This individual deterrence effect produces at least three times more revenue than the initial audit. Deterrence effects are relatively consistent across the income distribution. This results in the 12:1 return above the 90th percentile. We conclude by estimating the welfare consequences of audits using the MVPF framework and comparing audits to other revenue-raising policies. We find that audits raise revenue at lower welfare cost.

We study the welfare impacts of 96 climate-related tax and spending policies. We extend and apply the marginal value of public funds (MVPF) framework, most notably providing a new method for incorporating learning-by-doing spillovers. We find subsidies for the production of clean energy (such as wind production tax credits) have higher MVPFs than all other subsidies in our sample, including EV subsidies. Conservation nudges have large MVPFs when targeting regions with dirty grids. Fuel taxes and cap-and-trade policies are highly efficient means of raising revenue. We also construct traditional cost-per-ton estimates and compare and contrast the lessons they provide. (JEL D83, H23, H25, L62, Q42, Q54, Q58)