The Importance of Modeling Income Taxes Over time$bU.S. Reforms and Outcomes

While "'Tis impossible to be sure of any thing but Death and Taxes" (Bullock, 1716), the structure of taxes and their burden has undergone large and frequent changes over time. We provide a brief history of the U.S. federal income tax reforms since the 1960s, we calculate effective federal income tax rates for each wave of the Panel Study of Income Dynamics, and we discuss how effective taxation has changed over time from 1969 to 2016. We show that most tax regimes are short-lived and that the variation in taxes over time and across groups is large. We also use an estimated dynamic model of couples and singles to show that the various tax regimes that we estimate imply very different labor market and saving behavior. This stresses the importance of studying and modeling tax changes over time and across groups