Research Interests

Public Economics, Urban and Regional Economics, Applied Microeconomics, and Labor Economics

 

 

Working Papers

 

1. "Taxes, Wage Capitalization and the Ability of States to Redistribute Income" with Seth H. Giertz (Job Market Paper)

 

Abstract: Local and state governments attempt to lessen after-tax income inequality via progressive taxation. However, migration responses of capital and labor undermine such attempts. Location theory, with some caveats, predicts that cross-state migration will continue until the redistributive effects from taxation are fully capitalized into gross wages leaving after-tax wages unchanged. Something close to full wage capitalization had been the dominant view among economists for several decades. However, empirical evidence suggests that there is no longer a consensus. At one extreme, Feldstein and Wrobel (1998) report evidence of full tax capitalization for US states. At the other extreme, Leigh (2008) reports very little to no wage capitalization. We revisit this question by creating a pseudo panel from cross-sections of CPS data spanning years 1997 to 2015. In contrast to the extreme findings, we find evidence of substantial, albeit partial, wage capitalization. Our “best” estimate is that pre-tax wages adjust in response to redistributive state and local taxes, negating roughly 50 percent of effect compared to counterfactual with no behavioral responses.

 

 

2. Property Tax Capitalization, A Case Study of Dallas County with Seth H. Giertz and Kurt J. Beron

 

Abstract: This paper estimates the degree to which property taxes are capitalized into housing values, using proprietary data from the Dallas County Appraisal District (DCAD) from 2014 to 2016. We examine the effect of two types of property taxes on housing values. First, the taxes that are raised to finance educational services. Second, property taxes are raised to finance other local public services. With respect to the ISD taxes, we limit our sample to houses that fall into the half-mile blocks around the independent school district (ISD) boundaries. Using “block fixed effects” in the hedonic regression is expected to effectively control for the neighborhoods’ quality variations. Furthermore, to estimate the degree of property-tax capitalization for city-level we look at houses that fall into the half-mile blocks around city boundaries. Our estimates show that the degree of property tax capitalization is substantial but, far from the full capitalization. At the school district level, almost 50 percent f the discounted future property tax payments are capitalized into housing values. This estimate equals 77 percent at the city level.

 

 

3. The Effect of the 2017 Tax Reform on Excess Burden from Owner-Occupied Housing

 

Abstract: The U.S. tax law allows itemizing homeowners to lower the housing user-costs by deducting mortgage interest and property taxes from federal taxable income. However, the provided tax subsidy causes efficiency losses equal to the government’s forgone tax revenue minus homeowners’ surplus gain. This paper aims to examine the effect of the Tax Cuts and Jobs Atc of 2017 (TCJA17) on the excess burden. We use the American Housing Survey (AHS) of 2013 to estimate the price and income elasticities of housing demand. Then, we calculate the excess burden in 2018 using a microsimulation approach. We find that price and income elasticities of housing demand is -0.62 and 0.21, respectively. The annual excess burden ranges from $64 to $4,252 in 2018. On average, TCJA17 reduces the excess burden by $426 per family.