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Debates about tax policy arise every year in Washington, and legislative changes occur almost as often. In just the past decade, corporate tax burdens were dramatically reduced and then subsequently increased. But who really bears the burden of taxation? Finding a satisfactory way to address this question remains one of the biggest challenges for economists. While much research has explored this issue using annual data on household incomes and expenditures, this book considers the multiple effects of taxes on individuals over their entire lifetimes.;Since annual incomes typically vary from year to year, and change systematically over the course of a lifetime, annual income is not necessarily a good indicator of a person's relative well-being. Instead, Don Fullerton and Diane Lim Rogers estimate lifetime wage profiles, categorize individuals into lifetime income groups, and re-estimate the pattern of earnings over the lifetime of each group. They utilize a general equilibrium model that encompasses household demands, work effort and savings, and they calculate the distribution of each current tax. Because their model includes all major US federal, state, and local taxes, it can be used to simulate the effects of changes in any of those taxes on investment, productivity, resource allocation and the distribution of burdens.
