American Economic Review Vol. 103 No. 4 2013

The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States

Karel Mertens¹; Morten O. Ravn²

¹ Department of Economics, 404 Uris Hall, Cornell University, Ithaca, NY 14853. · ² Department of Economics, Drayton House, University College London, 30 Gordon Street, London WC1E 6BT, UK.

Abstract

This paper estimates the dynamic effects of changes in taxes in the United States. We distinguish between changes in personal and corporate income taxes and develop a new narrative account of federal tax liability changes in these two tax components. We develop an estimator which uses narratively identified tax changes as proxies for structural tax shocks and apply it to quarterly post-WWII data. We find that short run output effects of tax shocks are large and that it is important to distinguish between different types of taxes when considering their impact on the labor market and on expenditure components.

DOI

10.1257/aer.103.4.1212

Volume

103

Issue

4

Pages

1212-1247

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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