Tax Policy and the Economy, Volume 39

Timely and authoritative research on the latest issues in tax policy.

Tax Policy and the Economy publishes current academic research on taxation and government spending with both immediate bearing on policy debates and longer-term interest. This volume highlights new insights on taxation, transfer programs, and related issues. First, analyzing the itemized medical deduction in the US federal income tax, Gopi Shah Goda, Ithai Lurie, Priyanka Parikh, and Chelsea Swete find that this provision disproportionately benefits higher-income taxpayers, particularly after the passage of the 2017 Tax Cuts and Jobs Act. They also consider alternative structures, such as a tax credit, that could make the distribution of the tax benefits for those with high medical outlays more equal. Next, Danny Yagan analyzes factors influencing the US federal budget deficit and the debt-to-GDP ratio. He describes the “growth dividend,” the impact of GDP growth on the debt ratio, and warns about the potential costs of high debt-to-GDP ratios, especially when interest rates rise. In the third paper, Theresa Gullo, Benjamin Page, David Weiner, and Heidi Williams synthesize the economic evidence on the economic and budgetary effects of R&D investment and examine how this evidence could be incorporated into the standard projections generated by various federal agencies. Fourth, Rosanne Altshuler, Lysle Boller, and Juan Carlos Suárez Serrato investigate profit shifting by US multinational corporations and evaluate the importance of aggregation errors in reported foreign earnings and on estimates of profit shifting elasticities based on these data. Finally, David Neumark and Zeyu Li find no employment effect of California’s Earned Income Tax Credit on less-skilled single mothers, in contrast with the effects of federal and other states’ programs. They suggest that structural differences and interactions with minimum wage laws explain this result.