Year: 2019
Type: dissertation
Abstract: This dissertation contains three essays that leverage novel administrative datasets to examine the relationship between public policies and the distribution of income. Chapter 1 analyzes the role of the firm in mediating responses to changes in personal income tax rates. I create a new linked owner-firm-employee dataset to study how a recent increase in the top marginal tax rate faced by pass-through business owners affected the compensation of employees in the firms they own. I find that employees in firms whose owners experienced a larger tax increase reported lower relative earnings following the tax reform. Approximately 18 cents per dollar of new business tax liability was passed through to employee earnings. The primary burden was borne by employees who remained with the firm following the tax change, and not a result of changes to workforce composition. I show that the ability to pass tax burdens onto employees depends on underlying features of the labor market, underscoring the interaction between tax policies and labor market institutions. The results provide some of the first direct evidence of pass-through from changes in the top marginal personal income tax to workers in lower tax brackets, implying that the incidence of the personal income tax is not fully borne by those directly subject to the tax. I examine the implications of this result for the equity and efficiency of personal income taxation. Chapter 2 uses unique administrative microdata, linking individual income reports with reports on foreign asset holdings, to estimate taxpayer responses to recent initiatives by the U.S. government to curb the use of offshore accounts to evade taxes. We find that enforcement caused approximately 50,000 individuals to disclose offshore accounts with a combined value of around $100 billion. Most disclosures happened outside voluntary disclosure programs, by individuals who never admitted prior noncompliance. Newly 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. The findings show that enforcement initiatives can affect tax compliance even among not directly targeted groups of taxpayers. Chapter 3 explores the recent trend in the U.S. workforce towards independent contractors (ICs) and away from employees. The essay establishes new criteria to identify ICs using administrative data from tax filings and finds that the share of the workforce with some IC income grew by 1.4 percentage points, or 20%, from 2001 to 2015. The largest share of ICs is in the top quartile of the income distribution and uses IC earnings as supplemental labor income. Yet, the fastest growing type of IC uses contractor earnings as the primary household income source, over half of which are in the bottom quartile of the income distribution. These trends are particularly pronounced among female ICs, who have contributed over 60% of the total growth in IC labor over the period. Additionally, we find that the share of firms using IC labor increased by 20 percent, that the largest relative increase has been among small firms, and that the growth is spread across industries. These trends imply that the long-run growth in IC labor cannot solely be attributed to side jobs, or to the rise of a few online platform firms, but may represent a more structural shift in the labor market, particularly for women.
Author: Max Risch
Language: English
Topic: Economic and Fiscal Studies
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funder: University of Michigan
OpenAlex ID: W2990829682