Evidence on the insurance effect of marginal income taxes
- Marginal income taxes may have an insurance effect by decreasing the effective fluctuations of after-tax individual income. By compressing the idiosyncratic component o personal income fluctuations, higher marginal taxes should be negatively correlated with the dispersion of consumption across households, a necessary implication of an insurance effect of taxation. Our study empirically examines this negative correlation, exploiting the ample variation of state taxes across US states. We show that taxes are negatively correlated with the consumption dispersion of the within-state distribution of non-durable consumption and that this correlation is robust.
| Author: | Charles Grant, Christos Koulovatianos, Alexander Michaelides, Mario Padula |
|---|---|
| URN: | urn:nbn:de:hebis:30-53239 |
| Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2008,06 |
| Series (Serial Number): | CFS working paper series (2008, 06) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2008 |
| Year of first Publication: | 2008 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2008/03/03 |
| Tag: | Consumption Insurance; Tax Distortions; Undiversifiable Earnings Risk |
| GND Keyword: | Einkommensteuer; Steuersatz |
| Volume: | 37 |
| Issue: | February 1, 2008 |
| HeBIS-PPN: | 195434552 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Licence (German): |  Deutsches Urheberrecht |
