Pechman's Tax Incidence Study: A Note on the Data

摘要: In his recent study (1985), Joseph Pechman presents estimates of tax incidence by income classes for several years. This basically updates the earlier work and Benjamin Okner (1974), which developed 1966, using same methodology but applying it to more data generate burdens class 1970, 1975, 1980, 1985. note points out some peculiarities in underlying suggest there are serious problems with later Pechman's major results displayed Table 1. Panel A table gives average rates each household deciles panel B both variant ic.' (Ignore last column moment.) As can be seen, combined rate top decile is estimated fall between 1966 1980 while rises lowest decile. The ratio bottom declines from 1.8 1.3 a significant decrease progressivity. explains diminished progressivity noting that relative importance various taxes has changed since 1966: "The system became less progressive... primarily because corporation property declined emphasis was placed on payroll tax" (p. 10). Although true been change contribution this does not account decline shown estimates. easily demonstrated scaling up or down decile's due proportion overall 1980. (For example, had fallen 3.0 percent total 2.0 we would take two-thirds rates, i.e., 1.4 decile, as an estimate tax.) shows these calculations, summed over all taxes. These figures if only taxes, have about progressive 1966. Careful inspection 1 clearly indicates something else besides responsible difference Note particular (principally Social Security tax). 2.6 having risen 8.8 percent, increase 223 even though rose scant 32 period. Even puzzling how structure changed. through fifth regressive at higher deciles, they throughout entire distribution. At point will helpful explain why other studies (as well estimates) found distribution top.2 *Department Economics, Texas A&M University, College Station, TX 77843. 'Eight different sets assumptions were used study. Variant Ic tends embody competitive regarding response economy 2See, my William Johnson (1979) Richard Musgrave, Karl Case, Herman Leonard (1974).