Published and Forthcoming
Does Taxing Business Owners Affect Employees? Evidence from a Change in the Top Marginal Tax Rate (Forthcoming, The Quarterly Journal of Economics)
CESifo Distinguished Affiliate Award for best paper by a young researcher in Public Economics.
Trickle-Down Revisited. Forthcoming, Oxford Review of Economic Policy, edited by İrem Güçeri and Joel Slemrod
In this paper I discuss what can be learned about “trickle-down” ideas from recent empirical evidence on tax incidence, or the effect of tax policies on the distribution of welfare. I underscore three lessons: First, recent research suggests that business income taxes affect the earnings of workers, but these effects largely derive from taxing rents and rent-sharing, highlighting the importance of these channels for determining the ultimate incidence. Second, when workers are affected by these taxes, the burden is not borne equally by all workers, but predominantly by those at the top of the earnings distribution. Third, across different tax policies that statutorily affect the rich, the burden is largely borne by the rich, but heterogeneity in responses across tax incentives and taxpayers provides context for incidence analyses. Throughout, I discuss the value of analyzing heterogeneous responses, particularly how tax incidence depends on labor markets, product markets and tax systems.
The Offshore World According to FATCA: New Evidence on the Foreign Wealth of U.S. Households, Accepted, Tax Policy and the Economy. (with John Guyton, Niels Johannesen, Patrick Langetieg, Daniel Reck, Joel Slemrod). NBER working paper #31055, March 2023.
This paper uses account-level information, reported to the IRS by foreign financial institutions under the Foreign Account Tax Compliance Act (FATCA), to produce new evidence on the foreign financial wealth of U.S. households. We find that U.S. taxpayers hold around $4 trillion in foreign accounts, almost half in jurisdictions usually considered tax havens. Combining the FATCA reports with other administrative tax data and tracing account ownership through partnerships, we document a steep income gradient in the propensity to hold assets in foreign financial institutions. Specifically, more than 60% of the individuals in the top 0.01% of the income distribution own foreign accounts, the vast majority in tax havens and more than half through a partnership. We discuss the likely implications of these findings for the overall impact of FATCA on tax compliance and government revenue.
Taxing Hidden Wealth: The Consequences of U.S. Enforcement Initiatives on Evasive Foreign Accounts (with Niels Johannesen, Patrick Langetieg, Daniel Reck and Joel Slemrod), American Economic Journal: Economic Policy, 2020, 12(3): 312-346. [Online Appendix]
In 2008, the IRS initiated efforts to curb the use of offshore accounts to evade taxes. This paper uses administrative microdata to examine the impact of enforcement efforts on taxpayers’ reporting of offshore accounts and income. We find that enforcement caused approximately 50,000 individuals to disclose offshore accounts with a combined value of about $100 billion. Most disclosures happened outside offshore voluntary disclosure programs, by individuals who never admitted prior noncompliance. Disclosed accounts were concentrated in countries often characterized as tax havens. Enforcement-driven disclosures increased annual reported capital income by $2-$4 billion, corresponding to $0.6-$1.2 billion in additional tax revenue.
Independent Firms and the Heterogeneous Impacts of Minimum Wage Increases: Evidence from Matched U.S. Employer-Employee Tax Returns, with Nirupama Rao (Draft available upon request)
A common concern surrounding minimum wage policies is their impact on independent businesses, for fear that they operate on margins too tight to accommodate cost increases or face demand too elastic to pass costs through to consumers. We examine how independent firms accommodate minimum wage increases along various product and labor market margins using a new matched firm-worker administrative dataset drawn from tax records. We find that, on average, firms in highly exposed industries do not engage in substantial employment reductions, but instead fully finance the added labor costs with new revenues. Among surviving firms, we even find small average increases in owner profits. Following low earning and young workers, we find that their earnings increase significantly, they are no less likely to be employed following minimum wage increases, and that retention rates in exposed firms rise. We show, however, that the average benefits experienced by these firms belie significant heterogeneity by firm size and productivity. Among restaurants, the most exposed industry, the minimum wage causes firm exits, concentrated among the least productive firms, and profit gains among survivors. These findings are consistent with a model of Cournot competition with heterogeneous productivity and fixed production costs. The cost shock and resulting exits result in selection by productivity among surviving and new entrant firms, and reallocation of demand to more productive survivors.
Independent Contractors in the U.S.: New Trends from 15 years of Administrative Tax Data, with Katie Lim, Alicia Miller and Eleanor Wilking
There is growing interest among policy makers and researchers in measuring the prevalence of independent contractors (ICs), partially due to concern that these workers do not enjoy the benefits provided to employees. However, identifying IC income is difficult because most existing datasets do not track it. We make two contributions to understanding changing patterns of IC income receipt. First, we translate the legal concept of an IC relationship into one that can be used to identify these relationships in tax data. Second, we use those data to establish several new empirical facts about individuals who receive IC income and the firms that contract them. We find that the share of workers with IC income has grown by 1.5 percentage points, or 22 percent, since 2001, pre-dating the rise of the gig economy and in line with previous estimates of IC growth. Independent contractor income receipt and its growth are not evenly distributed across workers. The largest share of workers with IC income are those in the top quartile of earnings who primarily receive wage income. But the fastest growing group are those in the bottom quartile of earnings who primarily receive IC income. Women saw more growth in IC income receipt than men, and smaller firms saw more growth in IC labor usage than larger firms. Together, these trends suggest that the long-run growth in IC labor in the U.S. cannot solely be attributed to individuals seeking supplemental income, or to the rise of a few online platform firms, but may represent a structural shift in the labor market, particularly for women.
Selected Work in Progress
Taxation of Innovation and Innovators, with Joel Slemrod and Stefanie Stantcheva