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This paper estimates the effective tax rate on entrepreneurial income, defined as the return to an individual who starts a successful new business and then sells their interest once it becomes an e...

Harry Grubert made important contributions to our thinking about international tax policies. He identified the numerous margins on which corporate tax systems could distort behavior in a global eco...

The Tax Cuts and Jobs Act of 2017 was the largest tax overhaul since 1986. Our assessment — based on a variety of sources — suggests that the act will do the following: stimulate the economy in the...

A longstanding concern of state and local governments is that a federal value-added tax (VAT) could severely limit their reliance on sales taxes. But a federal VAT could have even larger effects on...

We review the changing economic significance of various business entity types since the Tax Reform Act of 1986 (TRA86) and the implications of these changes for the design of tax policy. In particu...

This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the income tax: (1) limiting their tax benefit to a maximum percentage of in...

In recent years, the percentage of individual taxpayers using paid preparers and software has increased, while the share of taxpayers who self–prepare without software has dropped sharply. Using the Individual Taxpayer Burden Model developed by IBM Business Consulting Services for the IRS, we simulate the effects of preparation method on time and money costs of preparing tax returns. When we correct for self–selection bias, we find that each group on average selects the preparation method that costs the least for them. For example, software costs more than self–preparation for current self–preparers, but costs less than self–preparation for current software users.

This paper focuses on the design, development, and use of the Individual Taxpayer Burden Model (ITBM)— a microsimulation model developed jointly by IBM and the 1RS to estimate the amount of time an...

The use of tax incentives instead of direct spending to promote social and economic goals is growing. This paper consid- ers whether it matters if fiscal interventions take the form of direct spending or tax breaks. Tax breaks can, and increasingly do, re- place spending programs with the same effects on resource alloca- tion and income distribution. Costs of administration may differ between them, however, depending on program design features. While the choice between the two must be made on a case-by-case basis, the increased use of the tax system for social policy raises broader concerns about political accountability.

Increased labor force participation of the elderly can reduce the fiscal and economic stress from the projected aging of the population in the next century. This paper uses Survey of Income and Program Participation data matched with longitudinal earnings histories and Social Security benefit records to estimate joint work and benefit receipt choices for people age 62 and over. The probability of working is shown to depend on both worker characteristics and policy variables, with lower Social Security benefits and lower tax rates on wages both modestly increasing labor force participation of older workers.

timates from the literature to simulate the effective tax rate on assets that produce effects on tax revenue and economic effi- capital gain than on assets that produce ciency of a 15 percent maximum tax rate ordinary income. This distorts the choice on capital gains. In estimating efficiency among assets, leading to overinvestment effects, marginal income tax rates are ad- in gains-producing assets, and induces justed to hold tax revenue constant. The investors to incur transactions costs to results depend on the responsiveness of convert ordinary income to capital gain. capital gains realizations and corporate One important source of conversion of dividend payouts to their respective tax income to capital gain is the substitution prices. With payouts fixed, efficiency in- of corporate retained earnings for divicreases but revenue declines except with the dend payouts. Households may prefer divhighest estimated realizations response. idends to retained earnings because such With payouts endogenous, revenue de- payouts convey useful information and clines. The s@gnof the efficiency change increase shareholder control of the firm.' depends on the realizations response. The higher effective tax rate on dividends than on retained earnings, however, reNDER the U.S. income tax, as in most duces the desired payout rate. The optiUOECD countries, capital income that mal payout rate is one at which the inpeople accrue in the form of increases in formation (and other) benefits of an extra asset values (capital gains) is taxed only dollar of dividends to shareholders exwhen the gain is realized by sale or ex- actly equals the marginal net tax costs of payouts to the weighted average share