Daniel R. Feenberg

Income Inequality and the Incomes of Very High Income Taxpayers: Evidence from Tax Returns

This paper uses tax return data for the period 1951-1990 to investigate the rising share of adjusted gross income (AGI) that is reported on very high income tax returns. We find that most of this increase is due to a rise in reported income for the one quarter of one percent of taxpayers with the highest AGIs. The share of total AGI reported by these taxpayers rose slowly in the early 1980s, and increased sharply in 1987 and 1988. This pattern suggests that at least part of the increase in the income share of high-AGI taxpayers was due to the changing tax incentives that were enacted in the 1986 Tax Reform Act. By lowering marginal tax rates on top-income households from 50% to 28%, TRA86 reduced the incentive for these households to engage in tax avoidance activities. We also find substantial differences in the growth of the income share of the highest one quarter of one percent of taxpayers, and the share of other very high income taxpayers. This casts doubt on the view that the increasing inequality of reported incomes at very high levels is driven by the same factors that have generated widening wage inequality at lower income levels.

The Risk and Duration of Catastrophic Health Care Expenditures

Catastrophic medical expenses are an important economic risk facing the elderly. Little is known about the persistence of such out-of-pocket medical costs. We measure the time-series property of medical costs using information on medical deductions from a panel of tax returns. During the period of analysis, 1968-73, taxpayers could deduct medical expenses above 3 percent of income. We correct for the resulting censoring bias using multivariate Tobit estimated with a variant of the smoothed simulated maximum likelihood (SSML) method. The data suggest that the burden of out-of-pocket medical expenses is substantially larger for lower income families. Furthermore, the estimated coefficients suggest substantial time-persistence in out-of-pocket medical care costs; a

Does the investment interest limitation explain the existence of dividends

1 increase in out-of-pocket medical spending is predicted to increase future spending by an additional

The Effect of Increased Tax Rates on Taxable Income and Economic Efficiency: A Preliminary Analysis of the 1993 Tax Rate Increases

2.80. These results may shed light both on the social value of catastrophic health insurance as well on aggregate saving behavior.

Tax structure and public sector growth

Miller and Scholes show that under certain conditions the Federal Income tax taxes dividend income at a rate no higher than the rate on capital gains. Tabulations of actual 1977 tax returns show that the special circumstances under which this can occur apply to less than 3% of dividend income and no significant role can be ascribed to their result in the determination of corporate dividend policy.

Improving the accessibility of the NBER's historical data

The 1993 tax legislation raised marginal tax rates from 31 to 36 percent on taxable incomes between

It's Good to Be First: Order Bias in Reading and Citing NBER Working Papers

140,000 and

Who Benefits from Capital Gains Tax Reductions

250,000 and to 39.6 percent on incomes above

Are Interest Rates Really Low

250,000. This paper uses recently published Internal Revenue Service (IRS) data on taxable incomes by adjusted gross income (AGI) class to analyze how the 1993 tax rate increases affected taxable income, tax revenue, and economic efficiency. Our estimates are based on a difference-in-difference procedure that compares the growth of taxable incomes among taxpayers with AGIs over

The Significance of Federal Taxes as Automatic Stabilizers

200,000 with that of incomes of lower income taxpayers. We use the NBER TAXSIM model to adjust for interyear differences in the composition of the two taxpayer groups. The results show that high-income taxpayers would have reported 7.8 percent more taxable income in 1993 than they did if their tax rates had not increased. Because of the high threshold for the increase in tax rates, this decline in taxable income caused the Treasury to lose more than half of the extra revenue that would have been collected if taxpayers had not changed their behavior. The deadweight loss caused by the higher marginal tax rates (including the effects on labor supply and on consumption of goods and services favored by deductions and exclusions) is approximately twice as large as the