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Distributional Effects of the 2001 and 2003 Tax Cuts: How Do Financing and Behavioral Responses Matter?

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  • Elmendorf, Douglas W.
  • Furman, Jason
  • Gale, William G.
  • Harris, Benjamin H.

Abstract

We reexamine the distributional effects of the 2001 and 2003 tax changes, incorporating two factors omitted in standard distributional estimates: the financing of the tax changes, and the implications of behavioral responses for both after–tax income and other aspects of well–being. Using the standard methodology, most people are made better off by the tax cuts, with the biggest percentage and absolute gains in after–tax income received by high–income households. Using our novel methodology for "dynamic distributional analysis," a large majority of households are made worse off by the tax cuts, especially in the lower three income quintiles.

Suggested Citation

  • Elmendorf, Douglas W. & Furman, Jason & Gale, William G. & Harris, Benjamin H., 2008. "Distributional Effects of the 2001 and 2003 Tax Cuts: How Do Financing and Behavioral Responses Matter?," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(3), pages 365-380, September.
    • Handle: RePEc:ntj:journl:v:61:y:2008:i:3:p:365-80
    DOI: 10.17310/ntj.2008.3.02
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    File URL: https://doi.org/10.17310/ntj.2008.3.02
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    Cited by:

    1. Angyridis, Constantine & Jolly, Michael, 2010. "Fiscal Implications of the 2001 and 2003 Bush Tax Cuts," The Journal of Economic Asymmetries, Elsevier, vol. 7(1), pages 69-99.
    2. Burkhauser, Richard V. & Larrimore, Jeff & Simon, Kosali I., 2012. "A "Second Opinion" on the Economic Health of the American Middle Class," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(1), pages 7-32, March.
    3. Robert J. Barro & Jason Furman, 2018. "Macroeconomic Effects of the 2017 Tax Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 257-345.
    4. John Creedy & Norman Gemmell, 2013. "Measuring revenue responses to tax rate changes in multi-rate income tax systems: behavioural and structural factors," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(6), pages 974-991, December.
    5. Stephanie Ettmeier, 2022. "No Taxation without Reallocation: The Distributional Effects of Tax Changes," Discussion Papers of DIW Berlin 2022, DIW Berlin, German Institute for Economic Research.
    6. Thor O. Thoresen & Zhiyang Jia & Peter J. Lambert, 2016. "Is there More Redistribution Now? A Review of Methods for Evaluating Tax Redistributional Effects," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(3), pages 302-333, September.
    7. repec:bin:bpeajo:v:49:y:2019:i:2018-01:p:257-345 is not listed on IDEAS

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