We reexamine the distributional effects of the 2001 and 2003 tax changes, incorporating two factors omitted in standard distributional estimates: the financing of the tax changes, and the implications of behavioral responses for both after-tax income and other aspects of well-being. Using the standard methodology, most people are made better off by the tax cuts, with the biggest percentage and absolute gains in after-tax income received by high-income households. Using our novel methodology for "dynamic distributional analysis," a large majority of households are made worse off by the tax cuts, especially in the lower three income quintiles.
ASJC Scopus subject areas
- Economics and Econometrics