FEDS 2018-003
Entrepreneurship and State Taxation (PDF)

E. Mark Curtis and Ryan A. Decker

Abstract: Entrepreneurship plays a vital role in the economy, yet there exists little well-identified research into the effects of taxes on startup activity. Using recently developed county-level data on startups, we examine the effect of states' corporate, personal and sales tax rates on new firm activity and test for cross-border spillovers in response to these policies. We find that new firm employment is negatively--and disproportionately--affected by corporate tax rates. We find little evidence of an effect of personal and sales taxes on entrepreneurial outcomes. Our results are robust to changes in the tax base and other state-level policies.

Keywords: Labor supply and demand, Taxation, entrepreneurship, firm dynamics

DOI: https://doi.org/10.17016/FEDS.2018.003

FEDS 2018-002
Fiscal Implications of the Federal Reserve's Balance Sheet Normalization (PDF)

Michele Cavallo, Marco Del Negro, W. Scott Frame, Jamie Grasing, Benjamin A. Malin, and Carlo Rosa

Abstract: The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to under 5 percent. Further reducing longer-run reserve balances from $1 trillion to pre-crisis levels has little effect on the likelihood of net losses.

Keywords: Central bank balance sheets, Monetary policy, Remittances

DOI: https://doi.org/10.17016/FEDS.2018.002

FEDS 2018-001
Inequality in 3-D: Income, Consumption, and Wealth (PDF)

Jonathan Fisher, David Johnson, Timothy Smeeding, and Jeffrey Thompson

Abstract: We do not need to and should not have to choose amongst income, consumption, or wealth as the superior measure of well-being. All three individually and jointly determine well-being. We are the first to study inequality in three conjoint dimensions for the same households, using income, consumption, and wealth from the 1989-2016 Surveys of Consumer Finances (SCF). The paper focuses on two questions. What does inequality in two and three dimensions look like? Has inequality in multiple dimensions increased by less, by more, or by about the same as inequality in any one dimension? We find an increase in inequality in two dimensions and in three dimensions, with a faster increase in multi-dimensional inequality than in one-dimensional inequality. Viewing inequality through one dimension greatly understates the level and the growth in inequality in two and three dimensions. The U.S. is becoming more economically unequal than is generally understood.

Keywords: Consumption, Inequality, Wealth

DOI: https://doi.org/10.17016/FEDS.2018.001

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Last Update: January 02, 2018