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Autoren: 
Altig, David
Auerbach, Alan J.
Higgins, Patrick
Koehler, Darryl
Kotlikoff, Laurence J.
Leiseca, Michael
Terry, Ellyn
Ye, Victor Yifan
Datum: 
2019
Schriftenreihe/Nr.: 
Working Paper No. 2019-7
Zusammenfassung: 
The Tax Cut and Jobs Act of 2017 (TCJA) made significant changes to corporate and personal federal income taxation, including limiting the SALT (state and local property, income and sales taxes) deductibility to $10,000. States with high SALT tend to vote Democratic. This paper estimates the differential effect of the TCJA on red- and blue-state taxpayers and investigates the importance of the SALT limitation to this differential. We calculate the effect of permanent implementation of the TCJA on households using The Fiscal Analyzer: a life-cycle, consumption-smoothing program incorporating all major federal and state fiscal policies. We find that the average percentage increase in remaining lifetime spending under the TCJA is 1.6 percent in red states versus 1.3 percent in blue states. Among the richest 10 percent of households, this differential is larger. Rich households in red states enjoyed a 2.0 percent increase compared to a 1.2 percent increase among the rich in blue-state households. This gap is driven almost entirely by the limitation on the SALT deduction. Excluding the SALT limitation from the TCJA results in a spending gain of 2.6 percent for rich red-state households compared to 2.7 percent for rich blue-state households.
Schlagwörter: 
fiscal policy
elections
Tax Cuts and Jobs Act
resource distribution
federal tax reform
state and local taxes
life cycle model
JEL: 
D15
D31
D72
E62
H20
H22
H71
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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