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Accounting for Income Changes Over the Great Recession Relative to Previous Recessions: The Impact of Taxes and Transfers

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  • Jeff Larrimore
  • Richard V. Burkhauser
  • Philip Armour

Abstract

Using decomposition analysis together with March CPS data, we consider the relative importance of factors accounting for changes in post-tax, post-transfer income during each of the last four recessions. Unlike the double dip recession of the 1980s, employment drops rather than falling wage earnings drove income declines during the Great Recession. Furthermore, taxes and transfers played a much greater role in offsetting market income losses — a result largely missed in analyses not accounting for taxes and transfers. This is particularly so among the bottom quintile where lower taxes and increased transfers offset more than one-half of market income declines.

Suggested Citation

  • Jeff Larrimore & Richard V. Burkhauser & Philip Armour, 2015. "Accounting for Income Changes Over the Great Recession Relative to Previous Recessions: The Impact of Taxes and Transfers," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(2), pages 281-318, June.
    • Handle: RePEc:ntj:journl:v:68:y:2015:i:2:p:281-318
    DOI: 10.17310/ntj.2015.2.03
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    Citations

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    Cited by:

    1. Jeff Larrimore & Jake Mortenson & David Splinter, 2020. "Presence and Persistence of Poverty in US Tax Data," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 383-409, National Bureau of Economic Research, Inc.
    2. Bruch, Sarah K. & van der Naald, Joseph & Gornick, Janet C., 2022. "Poverty Reduction through Federal and State Policy Mechanisms: Variation Over Time and Across the U.S. States," SocArXiv jz5xp, Center for Open Science.
    3. Marianne Bitler & Hilary Hoynes & Elira Kuka, 2017. "Child Poverty, the Great Recession, and the Social Safety Net in the United States," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 36(2), pages 358-389, March.
    4. Mike Brewer & Iva Valentinova Tasseva, 2021. "Did the UK policy response to Covid-19 protect household incomes?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 19(3), pages 433-458, September.
    5. Sarah K. Bruch & Janet C. Gornick & Joseph van der Naald, 2020. "Geographic Inequality in Social Provision: Variation across the US States," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 499-527, National Bureau of Economic Research, Inc.
    6. Marina Gindelsky, 2022. "Do transfers lower inequality between households? Demographic evidence from Distributional National Accounts," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1233-1257, July.
    7. Larrimore, Jeff & Mortenson, Jacob & Splinter, David, 2022. "Earnings shocks and stabilization during COVID-19," Journal of Public Economics, Elsevier, vol. 206(C).
    8. Waring, Melody K. & Meyer, Daniel R., 2020. "Welfare, work, and single mothers: The Great Recession and income packaging strategies," Children and Youth Services Review, Elsevier, vol. 108(C).
    9. Sajid Ullah & Farman Ullah Khan & Vanina Adoriana Trifan & Adina Eleonora Spinu & Grigorie Sanda, 2022. "Modeling Key Strategies for Reducing Socio-Economic and Health Crisis: Perspective from COVID-19 Pandemic," IJERPH, MDPI, vol. 19(21), pages 1-21, October.
    10. Braga, Breno & Lerman, Robert I., 2019. "Accounting for homeownership in estimating real income growth," Economics Letters, Elsevier, vol. 174(C), pages 9-12.
    11. Willem L. Heeringa & Job Swank, 2019. "Heterogeneous Consumers, Credit Rationing, and Tax-Benefit Policies," De Economist, Springer, vol. 167(2), pages 105-126, June.

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