Quantitative Notes

A New Synthetic Data Set for Tax Policy Analysis

Colleagues and I developed a synthetic federal income tax microdata file, with support from the Open Source Policy Center. We synthesized the file using random forests and constructed record weights that minimize differences between targets developed from the IRS public use file and corresponding weighted values from the synthetic file. The file is quite useful for some tax policy analysis purposes but less useful for others. We intend to improve file quality in future iterations. We are preparing the file and documentation for use with the Policy Simulation Library’s Tax-Calculator federal income tax model, for free and without legal restrictions.

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Stock Price Perspective on Coronavirus Crash

This Quantitative Note provides evidence that the initial economic effects of the coronavirus pandemic in the United States are worse than any of the last 15 recessions, including the Great Depression. Specifically, average stock prices as measured by the Dow Jones Industrial Average (DJIA) have fallen faster in the last 37 days than in any previous five-week period at the beginning of a recession in the last 100 years. The current 35% decline of the DJIA compares with a decline of roughly 10% over the same period at the outset of the Great Depression. The hope is that this current shock will not last as long as the worst recessions of the past and will not depress stock prices as deeply.

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Revenue and Macroeconomic Effects of a 70% Marginal Tax Rate

Recently, there has been considerable discussion of a significant increase in the top marginal income tax rate. A salient top marginal tax rate is 70%. This note simulates the effects of a 70% top rate on different groups of filers and shows the impacts on revenue and macroeconomic aggregates. We find that an increase in the top marginal tax rate to 70% raises between $5 billion and $250 billion per year over the first 10 years, depending on the size of the top bracket to which this rate is applied. However, our macroeconomic simulations show that a 70% top rate lowers GDP by between 1.7% and 0.1% in the near term, although there may be positive effects on GDP in the longer term.

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