-
Could Increasing Taxes Be Expansionary?
Economists who study taxes typically focus on evaluating the effect of increasing the average tax rate, implicitly assuming that the change in tax burden is uniformly distributed. In a recent working paper, we considered the effect of changes in tax rates across people with varying incomes. In particular, we examined how macroeconomic outcomes would be affected by an increase in tax progressivity, in which more progressive taxes shift the tax burden from low-income earners to high-income earners. In our model, we identify jointly both a measure of progressivity and the level of taxes. An increase in progressivity is ... (full story)