A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics National Bureau of Economic Research (NBER) (Ed.) Periodical Part NBER Reporter Online, Volume 1981 NBER Reporter Online Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: National Bureau of Economic Research (NBER) (Ed.) (1981) : NBER Reporter Online, Volume 1981, NBER Reporter Online, National Bureau of Economic Research (NBER), Cambridge, MA This Version is available at: http://hdl.handle.net/10419/62107 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu NATIONAL BUREAU OF ECONOMIC RESEARCH, INC. SUMMER 1981 Program Report Taxation David F. Bradford Since the last article on the tax program in the Sum mer 1979 NBER Reporter, a name change from Program in Business Taxation and Finance to Program in Taxation has taken place, reflecting a broader scope of research. While the objective of the program is still to provide quan­ titative information useful in predicting the effects of al­ ternative tax institutions, with a special concern for the accumulation and allocation of capital, a new attention to tax influences on such activities as labor supply, ten­ ure choice in housing, and exploitation of natural re­ sources has been added. Prospective work on taxation in systems of governments, particularly the system of U.S. states, is also planned. At the same time, there has been continued interest in the issues that emerged in the early stages of the program such as: (1) What are the effects of existing rules on the portfo­ lio choices of savers? Is there a segmentation of the mar­ ket, with certain assets, such as real estate or low-dividend stock, concentrated in the hands of high-bracket tax­ payers and others, such as bonds arid high-dividend capital income taxation, questions such as the following stock, held mostly by tax-exempt institutions? have been addressed: (2) Can one measure the efficiency cost of distortions (7) What guidance does economic analysis give for in corporate debt-equity ratios brought about by the tax the income taxtreatment of the family, and especially of system? married couples? Using currently available knowledge (3) What is the effect of the tax system on the level of about behavioral responses, what do we know about the savings and investment? revenue and labor supply consequences of alternative (4) I n view of the advantageous tax treatment of capital approaches to eliminating the "marriage tax"? gains, why do corporations payout as much as they do (8) How can' one take into account aspects of quality in dividends? . and intensity of effort in measuring "labor supply"? What (5) How can one design practical tax rulesto neutralize is the efficiency cost of present income and payroll taxa­ the influence of inflation on the taxes bearing on invest­ tion of labor supply? ment and portfolio decisions? (9) How can one measure the degree of income equal­ (6) Who bears the burden of state corporation income ity in an econpmy and what can one say about the effect taxes? of taxes on it? In addition to these issues concerned primarilv with It is impossible in a short summary to comment on all The National Bureau of Economic Research is a private, nonprofit of the research that has been done under the tax pro­ research organization founded in 1920 and devoted to objective quan­ gram. Instead, an overview of activity in four broad and titative analysis of the American economy. Its officers and board of related subject areas-simulation of the effect of taxes, directors are: taxation and inflation, taxation and corporation finance, Chairman-Eli Shapiro and tax incentives for saving and investment-follows. Vice Chairman-Franklin A. Lindsay Treasurer-Charles A. Walworth President and Chief Executive Officer-Martin Feldstein vice President-Charles E. McLure, .Jr. Simulation of the Effects of Taxes Executive Director-David Hartman Simulating the effect of tax changes has long been a Director of Finance and Administration-Sam Parker basic tool of policy makers. "Simulation" may mean noth­ ing more than projecting revenue consequences, or it may extend to considerable detail. Improvements in DIRECTORS AT LARGE computing capacity, econometric technique, and the Moses Abramovitz Michael H. Moskow available statistical information have made possible con­ George T. Conklin, Jr. James J. O'Leary tinuing progress in simulation. Bureau Research Asso­ Morton Ehrlich Peter G. Peterson ciate John Shoven and Faculty Research Fellow Don Solomon Fabricant Robert v. Roosa Fullerton have been at the forefront ofthe use of comput­ Martin Feldstein Richard N. Rosett Edward L. Ginzton Bert Seidman able models of the full system of markets in the economy David L. Grove Eli Shapiro for analyzing tax changes. These models take into ac­ Walter W. Heller Stephen Stamas count the feedback of changes in one sector on activity Franklin A. Lindsay Lazare Teper and revenues in other sectors. One example would be f Roy E. Moor Donald S. Wasserman the effect of tax subsidies to mineral development on the i Geoffrey H. Moore. Marina v. N. Whitman I' prices of automobiles, and thus on employment, income t tax receipts, and so on in the latter sector. Fullerton ap­ DIRECTORS BY UNiVERSITY APPOINTMENT plied this approach to the likelihood that supply-side re­ Charles H. Berry, Princeton sponses to general reductions in the tax rates would I Otto Eckstein, Harvard actually increase tax resources.' He concluded that as Walter D. Fisher, Northwestern far as the responses of the major aggregates-Iaborsup­ J. C. LaForce, California, Los Angeles ply and capital stock-and their industrial allocation are I Paul McCracken, Michigan Daniel McFadden, Massachusetts Institute of Technology concerned, available. evidence puts the U.S. tax rates Almarin Phillips, Pennsylvania well below the level that would maximize revenue. I James L. Pierce, California, Berkeley One of the advantages of general equilibrum model­ Lloyd G. Reynolds, Yale ing, as this type of analysis is called, is the discipline it Nathan Rosenberg, Stanford James Simler, Minnesota imposes since it requires fully consistent accounting William S. vickrey, Columbia with careful attention to all tax and other payment flows. Dudley Wallace, Duke These include not only the major federal taxes but also Burton A. Weisbrod, Wisconsin state and local sales, income, payroll, excise, and prop­ Arnold Zellner, Chicago erty taxes. Not always appreciated is how difficult it can be to determine, for example, what specific tax is appli­ DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS cable to a decision to make a given investment. To an­ swer the question in a historical sense requires painstak­ Carl F. Christ, American Economic Association Robert C. Holland, Committee for Economic Development ing assembly of accounting data from many sources, Stephan F. Kaliski, Canadian Economics Association with difficult judgments required at many stages. Shoven, Albert G. Matamoros, National Association of Business Economists Fullerton, and their colleagues have made important Douglass C. North, Economic History Association contributions to a steady advance in the construction of Rudolph A. Oswald, American Federation of Labor and Congress a consistent and carefully documented information base of Industrial Organizations Joel Popkin, American Statistical Association for this work. G. Edward Schuh, American Agricultural Economics Association Even good accounting information, however, leaves James C. Van Horne, American Finance Association the analyst with challenging questions. One of the more Charles A. Walworth, American Institute of Certified Public important and interesting is the interpretation to be given Accountants to average tax rates, that is, ratios of tax payments in the accounts to the corresponding factor payment flows. Since accounting data reflect a variety of previous deci­ Contributions to the National Bureau are tax deductible. Inquiries concerning contributions may be addressed to Lawrence B. McFaddin, sions and circumstances, there may be a considerable Directorof Development, National Bureau of Economic Research,lnc., divergence between average tax rates and the marginal 1050 Massachusetts Avenue, Cambridge, MA. 02138. rates impinging on decisions to invest at a given time. The Reporter is issued for informational purposes and has not been There is, in addition, the question of how the