This paper illustrates how one can use causal effects of a policy change to measure its welfare impact without decomposing them into income and substitution effects. Often, a single causal effect suffices: the impact on government revenue. Because these responses vary with the policy in...

In 2015, Michigan increased its Career and Technical Education (CTE) funding and changed its funding formula to reimburse programs-based student progression through program curricula. Although this change nearly doubled program completion rates, student enrollment and persistence were unaffected;...

The most cost-effective policies for achieving CO2 abatement (e.g., carbon taxes) fail to get off the ground politically because of unacceptable distributional consequences. This paper explores CO2 abatement policies designed to address distributional concerns. Using an intertemporal numerical...

Robust support for corporate income taxation is a puzzle for standard tax theory because the tax's incidence is uncertain and unreliable. We propose a resolution: if the corporate tax is seen as a benefit-based tax, its normative appeal depends on the correspondence between its incidence and...

This paper surveys major issues in the theory of tax incidence. These include the incidence of taxes in dynamic as well as static economies and open as well as closed economies. The survey does not represent a comprehensive review of the literature, rather it is offered to the reader as a...

A recurring theme in the literature on taxation has been uncertainty about the incidence of the corporate income tax. The answer may be even more elusive for state taxes than for federal taxes. As seen by one state, a cor- porate income tax levied on the basis of formula apportionment of total...

To study the effects of 'double taxation' (first at the corporation level, then at the shareholder level this paper analyzes a model with a tax on all corporate distributions to equity owners and no other taxes. Contrary to the common view, the tax is shown to have no substitution effect and, in...

This paper uses quasi-experimental variation in payroll taxes to estimate their incidence and investigate how firms use their input factors. We find that higher payroll tax rates lead to large employment responses and have no effects on employee earnings. As payroll taxes increase, firms...

Does significant market power or the presence of large rents affect optimal income taxation, calling for greater redistribution due to tainted gains? Or perhaps less because of an additional wedge that distorts labor effort? Do concerns about inequality have implications for antitrust,...

In a second-best optimal growth setup with only factor taxes, it is in general optimal to fully replace capital by labor income taxation in the long run. We revisit this important issue by developing a human capital-based endogenous growth model with frictional labor search, allowing each firm...