Note: The views expressed in this paper do not reflect those of the Federal Reserve Bank of Atlanta nor the Federal Reserve System. The paper has benefited from comments from James Alm, Michael Leeds, Roberta Moore, John Robertson, Sally Wallace, Jennifer Ward-Batts, two anonymous referees, and participants of the University of California-Merced Conference on Earnings Inequality. Excellent research assistance was provided by Daniel Melaugh, M. Laurel Graefe, Navnita Sarma, Chinying Xie, Danyang Li, and Melissa Trussell.
ASSESSING THE WELFARE IMPACT OF TAX REFORM: A CASE STUDY OF THE 2001 U.S. TAX CUT
Article first published online: 10 APR 2012
© 2012 Federal Reserve Bank of Atlanta. Review of Income and Wealth © International Association for Research in Income and Wealth 2012
Review of Income and Wealth
Volume 58, Issue 2, pages 233–256, June 2012
How to Cite
HOTCHKISS, J. L., MOORE, R. E. and RIOS-AVILA, F. (2012), ASSESSING THE WELFARE IMPACT OF TAX REFORM: A CASE STUDY OF THE 2001 U.S. TAX CUT. Review of Income and Wealth, 58: 233–256. doi: 10.1111/j.1475-4991.2012.00493.x
- Issue published online: 2 MAY 2012
- Article first published online: 10 APR 2012
Vol. 60, Issue 2, 404, Article first published online: 9 JAN 2014
- household welfare;
- joint labor supply;
- tax reform
This paper implements a relatively simple methodological approach to estimate the impact on family welfare of a specific tax reform. The measured impact can differ greatly from simple marginal tax rate comparisons, and conclusions about the distribution of the welfare impact can vary depending on the basis of comparison. For example, absolute welfare gains from the 2001 U.S. tax reform were concentrated among the highest and lowest income families, whereas welfare gains measured as a share of pre-tax income are found to be nearly monotonically declining in income.