Donald Bruce

Effects of the United States tax system on transitions into self-employment

Abstract This paper examines the impact of US income and payroll taxes on the decision of wage-and-salary employees to become self-employed. I exploit variations in the tax treatment of wage and self-employment income using the Panel Study of Income Dynamics. Results show that differential taxation has significant effects on the probability of making a transition into self-employment. Reducing an individuals marginal tax rate on self-employment income while holding his marginal wage tax rate constant reduces the probability of entry. Conversely, reducing his relative average tax rate in self-employment increases this probability by a smaller amount.

Do Husbands Matter? Married Women Entering Self-Employment

This paper investigates the effect of a husbands self-employment experience on the probability that his wife will enter self-employment. Results suggest that having a husband with some exposure to self-employment nearly doubles the probability that a woman will become self-employed, all else equal. Further, the effect is found to be strongest if a womans husband is actually self-employed at the time she is contemplating a transition. Having a husband with prior self-employment experience also has an important yet quantitatively smaller effect. A series of robustness checks suggest that family businesses and assortative mating only partially explain this large effect. Intrahousehold transfers of human (and, to a much lesser degree, financial) capital might also play a role.

Tax Base Elasticities: A Multi-State Analysis of Long-Run and Short-Run Dynamics

We examine the relative dynamic responses of state personal tax revenues and sales tax bases to changes in state personal income. Our econometric analysis, which includes separate analyses of long-run and short-run dynamics for each state, permits the estimation of asymmetric short-run responses depending upon the relationship between current and expected tax base growth. Results indicate that the average long-run elasticity for income taxes is more than double that for sales taxes. Most states have asymmetric short-run income elasticities, which are again greater for income taxes than for sales taxes. However, a joint analysis of long- and short-run dynamics reveals that neither tax is universally more volatile. After calculating state-specific income elasticities for both taxes, we employ cross-section regression techniques to explain the variation in elasticities across states. Several policy factors are found to be important, including elements of tax bases and rate structures.

On The Extent, Growth, and Efficiency Consequences of State Business Tax Planning

Our focus in this essay is on the extent to which tax planning in response to variations in state tax policy has affected state corporate income tax bases and revenues. Tax planning is defined as a broad set of actions undertaken by firms to reduce their tax liability. Financial or accounting tax planning is contrasted with what we refer to as locational distortions, in which firms move physical operations to avoid higher tax liabilities. Results from a fixed effects instrumental variables regression model using a 1985-2001 panel of state-level data provide highly suggestive evidence that tax planning activity significantly diminishes taxable corporate profits in high tax states. Specifically, we find that state corporate income tax bases decline by nearly 7 percent following a one- percentage-point increase in the top marginal corporate income tax rate, controlling for locational distortions. We also find that throwback rules are usually ineffective in restoring corporate income tax bases while combined reporting requirements are often effective. Further analysis indicates that tax planning has not diminished the locational distortions of tax policy.

Do tax rate cuts encourage entrepreneurial entry

Purpose – Policy makers have long been interested in whether tax policies can be used to encourage entrepreneurial activity, but prior studies have produced ambiguous results. The purpose of this paper is to investigate whether tax rates affect the decision to begin a new entrepreneurial venture. Design/methodology/approach – The paper uses a 12-year panel of tax return data to examine the effects of tax rates on entrepreneurial entry. The paper calculates household-level tax rates and employ multiple measures of entrepreneurship. Findings – The results offer evidence that cuts in relative tax rates faced by entrepreneurs, either in the form of higher rates for wage workers or lower rates for entrepreneurs, increase entry. The magnitudes of these effects suggest that an across the board tax cut would increase entry. Practical implications – These results suggest that policy makers interested in entrepreneurial activity should account for the affects of tax policies on entrepreneurial activity in their dec...

Welfare Program Reentry among Postreform Leavers

The dramatic welfare reforms of 1996 affected public assistance usage patterns, possibly leading to more cycling on and off welfare as opposed to long-term continuous participation. We examine 128,775 Tennessee families that left welfare between October 1996 and April 2001. Of these, about one-third returned to the program at least once during this period. We provide statistical portraits of these families and compare reentrants with those who remained off public assistance. We conclude with a multivariate analysis of the determinants of reentry. Results suggest that families with younger, female, or black caretakers and those with more children are more likely to return. Those less likely to return include families whose caretakers were married or who had more education or were not working as of case closure. Families who left because of a time limit or who accumulated more months of program participation were also more likely to return.

Supplemental Nutrition Assistance Program Participation and Health: Evidence from Low‐Income Individuals in Tennessee

We investigate the factors that contribute to participation in the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program) and the effects of such participation on self‐assessed health (SAH). Our estimation approach consists of an endogenous switching ordered probability model, using the copula approach, for a sample of current and former Temporary Assistance for Needy Families (TANF) recipients in Tennessee. Results indicate that sociodemographic characteristics play a role in SNAP participation. Interestingly, we find that participation in SNAP is inversely related to SAH.

On the Incidence of US Tariffs

This paper provides evidence on the incidence of tariffs on products of export interest to developing countries by investigating the relationship between per capita incomes of US trading partners and tariff rates. It constitutes the first attempt to assess the incidence of tariffs imposed by the US on countries that span the entire range of per capita incomes. Average tariff rates are lower for the poorest and richest countries and higher for countries in the middle of the income distribution. This finding is not consistent with the widely held view that tariffs used by industrial nations bear more heavily on products of export interest to poorer developing countries than on imports from industrial nations. It is consistent with the tariff escalation pattern reported in earlier studies if advanced countries account for most products at the high end of the fabrication scale. Results show that poorest countries will find it difficult to escape tariffs by attaining higher levels of economic development.

Clusters of Multiple Complex Chronic Conditions: A Latent Class Analysis of Children at End of Life

CONTEXT Children at end of life often experience multiple complex chronic conditions with more than 50% of children reportedly having two or more conditions. These complex chronic conditions are unlikely to occur in an entirely uniform manner in children at end of life. Previous work has not fully accounted for patterns of multiple conditions when evaluating care among these children. OBJECTIVES The objective of the study was to understand the clusters of complex chronic conditions present among children in the last year of life. METHODS Participants were 1423 pediatric decedents from the 2007 to 2008 California Medicaid data. A latent class analysis was used to identify clusters of children with multiple complex chronic conditions (neurological, cardiovascular, respiratory, renal, gastrointestinal, hematologic, metabolic, congenital, cancer). Multinomial logistic regression analysis was used to examine the relationship between demographic characteristics and class membership. RESULTS Four latent classes were yielded: medically fragile (31%); neurological (32%); cancer (25%); and cardiovascular (12%). Three classes were characterized by a 100% likelihood of having a complex chronic condition coupled with a low or moderate likelihood of having the other eight conditions. The four classes exhibited unique demographic profiles. CONCLUSION This analysis presented a novel way of understanding patterns of multiple complex chronic conditions among children that may inform tailored and targeted end-of-life care for different clusters.

Factors influencing the implementation of health care reform: an examination of the Concurrent Care for Children provision.

In the wake of the 2013 Presidential reelection, states now face the reality of implementing the healthcare reform, including ACA section 2302 (Concurrent Care for Children). The purpose of our study was to examine the influence of economic, political, and legal factors on state implementation of ACA 2302. Using data from 2010 to 2012, our analysis revealed that for early implementers economic, political or legal factors did not influence implementation of ACA 2302. In 2011, states that were engaged in Medicaid cost containment efforts were more likely to implement ACA 2302 and in 2012, states experiencing a budgetary crisis were less likely to implement ACA 2302. Our findings suggest that state-level implementation of ACA 2302 may be an important bellwether for future healthcare reform implementations.