Tuesday, January 30, 2018
Andrew Hayashi (Virginia) presents Countercyclical Tax Bases at NYU today as part of its Tax Policy Colloquium Series hosted by Lily Batchelder and Daniel Shaviro:
Tax scholarship has tended to focus on the efficiency properties of different tax bases under assumptions about the macroeconomy that only sometimes hold, and has paid relatively little attention to how those bases operate in recessions. I show how different tax bases interact with household credit constraints and adjustment costs to either stabilize or aggravate economic shocks. I argue that the choice of the local tax base should consider the effect that the base has on the resilience of the economy by stabilizing government spending and household consumption expenditures.
I report evidence of the relationship between local tax bases and the resilience of local economies to the 2001 and 2008 recessions.