Who Bears the Lifetime Tax Burden?

Who Bears the Lifetime Tax Burden?

Who Bears the Lifetime Tax Burden?

Who Bears the Lifetime Tax Burden?

Synopsis

The question of who pays the taxes in the United States is of great concern not only to policymakers and economists but to all segments of American society. For many years the Brookings Institution sponsored a statistical research program to aid in understanding thedistribution of tax burdens by income class.

Excerpt

The question of who pays the taxes in the United States is of great concern not only to policymakers and economists but to all segments of American society. For many years the Brookings Institution sponsored a statistical research program to aid in understanding the distribution of tax burdens by income class. the program resulted in two seminal studies by Joseph A. Pechman : Who Bears the Tax Burden? coauthored withBenjamin A. Okner, in 1974; and in 1985, Who Paid the Taxes, 1966-85?

Those two books have set the standard for virtually all studies of the distributional effects of alternative tax rules, including those undertaken by the U.S. Treasury Department, the Congressional Budget Office, and the Joint Tax Committee. Households are ranked from rich to poor on the basis of a comprehensive measure of annual economic income, and effective tax burdens are computed at each level.

The current volume, by Don Fullerton and Diane Lim Rogers, continues this Brookings tradition. As in Pechman's earlier work, the primary concern is the relative taxation of rich and poor. If only annual income is measured, however, the lowest income group may include some people who are just getting started on a high-income career, some who have retired from a high- income career, as well as others who are persistently poor. To better identify and separate the rich and poor, this book employs a lifetime definition of income and tax. It estimates lifetime wage profiles for individuals, classifies them into groups defined by the level of lifetime income, and calculates the long-run burden on each group. in addition, the authors build a general equilibrium model able to compute the effects of each tax on wage rates, interest rates, and the prices of goods purchased by consumers. the model also sheds light on the efficiency of resource allocations under alternative tax regimes.

Don Fullerton is professor of economics at the University of Virginia and visiting professor of economics and public policy at Carnegie Mellon; Diane Lim Rogers is assistant professor of economics at Pennsylvania State University. They acknowledge their great intellectual debt to Joseph Pechman, who not only laid the analytical foundation for all such research in tax incidence but encouraged them to work on this topic and made several key suggestions. They are also grateful for the assistance they received from many other . . .

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