The macroeconomic effects of tax changes
Subtitle: estimates based on a new measure of fiscal shocks
By: Christina D. Romer, David H. Romer
Contributors: Romer, David; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13264; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13264.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "This paper investigates the impact of changes in the level of taxation on economic activity.  We use the narrative record -- presidential speeches, executive-branch documents, and Congressional reports -- to identify the size, timing, and principal motivation for all major postwar tax policy actions.  This narrative analysis allows us to separate revenue changes resulting from legislation from changes occurring for other reasons.  It also allows us to further separate legislated changes into those taken for reasons related to prospective economic conditions, such as countercyclical actions and tax changes tied to changes in government spending, and those taken for more exogenous reasons, such as to reduce an inherited budget deficit or to promote long-run growth.  We then examine the behavior of output following these more exogenous legislated changes.  The resulting estimates indicate that tax increases are highly contractionary.  The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes.  The large effect stems in considerable part from a powerful negative effect of tax increases on investment.  We also find that legislated tax increases designed to reduce a persistent budget deficit appear to have much smaller output costs than other tax increases"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 8/16/2007.

Includes bibliographical references.

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Mode of access: World Wide Web.