Does It Pay, at the Margin, to Work and Save? -- Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving

Building on Gokhale, Kotlikoff, and Sluchynsky's (2002) study of Americans' incentives to work full or part time, this paper uses ESPlanner, a life-cycle financial planning program, in conjunction with detailed modeling of transfer programs to determine a) total marginal net tax rates on current labor supply, b) total net marginal tax rates on life-cycle labor supply, c) total net marginal tax rates on saving, and d) the tax-arbitrage opportunities available from contributing to retirement accounts. In seeking to provide the most comprehensive analysis to date of fiscal incentives, the paper incorporates federal and state personal income taxes, the FICA payroll tax, federal and state corporate income taxes, federal and state sales and excise taxes, Social Security benefits, Medicare benefits, Medicaid benefits, Foods Stamps, welfare (TAFCD) benefits, and other transfer program benefits. The paper offers four main takeaways. First, thanks to the incredible complexity of the U.S. fiscal system, it's impossible for anyone to understand her incentive to work, save, or contribute to retirement accounts absent highly advanced computer technology and software. Second, the U.S. fiscal system provides most households with very strong reasons to limit their labor supply and saving. Third, the system offers very high-income young and middle aged households as well as most older households tremendous opportunities to arbitrage the tax system by contributing to retirement accounts. Fourth, the patterns by age and income of marginal net tax rates on earnings, marginal net tax rates on saving, and tax-arbitrage opportunities can be summarized with one word -- bizarre.

Comparing Average and Marginal Tax Rates Under the FairTax and the Current System of Federal Taxation

This paper compares marginal and average tax rates on working and saving under our current federal tax system with those that would arise under a federal retail sales tax, specifically the FairTax. The FairTax would replace the personal income, corporate income, payroll, and estate and gift taxes with a 23 percent effective retail sales tax plus a progressive rebate. The 23 percent rate generates more revenue than the taxes it replaces, but the rebate's cost necessitates scaling back non-Social Security expenditures to their 2000 share of GDP. The FairTax's effective marginal tax on labor supply is 23 percent. Its effective marginal tax on saving is zero. In contrast, for the stylized working households considered here, current effective marginal labor taxes are higher or much higher than 23 percent. Take our stylized 45 year-old, married couple earning $35,000 per year with two children. Given their federal tax bracket, the claw-back of the Earned Income Tax Credit, and the FICA tax, their marginal tax is 47.6 percent. The FairTax imposes a zero marginal tax on saving meaning that reducing this year's consumption by a dollar permits one to increase the present value of future consumption by a dollar. In contrast, the existing federal tax system imposes very high marginal taxes on future consumption. For our stylized working households foregoing a dollar's consumption this year to uniformly raise consumption in all future years raises the present value of future consumption by only 45.8 to 77.4 cents, i.e., the effective marginal tax rates on uniformly raising future consumption via saving facing our households ranges from 22.6 percent to 54.2 percent. The FairTax also reduces most of our stylized households' remaining average lifetime tax rates - and, often, by a lot. Consider our stylized 30 year-old, single household earning$50,000. The household's average remaining lifetime tax rate under the current system is 21.1 percent. It's 16.2 percent under the FairTax.

To Roth or Not? -- That is the Question

Do regular 401(k) and IRA accounts offer greater tax benefits than Roth 401(k)s and Roth IRAs? This is a tough question. Regular 401(k)s and IRAs save taxes in the short term; Roth accounts save taxes in the long term. Regular 401(k)s and IRAs are vulnerable to future income tax hikes, but may benefit from a future switch to consumption taxation if the switch exempts withdrawals from income taxation. Roth accounts are exempt from future income tax hikes, but are exposed to future consumption taxation. For any given assumption about future tax policy, assessing the relative merits of the two types of saving vehicles requires very accurate calculations of taxes in each future year -- calculations that incorporate not just standard federal income tax provisions, but also the Savers Credit, the taxation of Social Security benefits, the Alternative Minimum Tax, and state income taxation. This paper uses ESPlanner (Economic Security Planner) -- a financial planning software program co-developed by Kotlikoff -- to study the relative merits of regular and Roth retirement accounts. In providing its consumption smoothing recommendations, ESPlanner makes the highly detailed tax and Social Security benefit calculations needed to compare retirement account options. In particular, ESPlanner can determine how different retirement account options affect different households' living standards under different assumptions about future tax policy. Our main findings are these: Absent future tax changes, middle-income, single-parent households benefit slightly more from Roth accounts; other single and married households generally fare better with a regular 401(k). Future tax changes, however, can dramatically change this horse race. In the case of low- and middle-income households, Regular 401(k) accounts under-perform Roth accounts in terms of long-run living standards assuming income taxes will rise by 30 percent in retirement. But the Roth falls far short of the regular 401(k) if taxes in retirement are assessed on consumption rather than on income and the transition to consumption taxation exempts 401(k) withdrawals from income taxation.

Subsidizing Mass Adoption of Electric Vehicles: Quasi-Experimental Evidence from California

UC-ITS-2018-33Little is known about demand for EVs in the mass market. In this paper, we exploit a natural experiment that provides variation in large EV subsidies targeted at low- and middle-income households in California. Using transaction-level data, we estimate two important policy parameters using triple differences: the subsidy elasticity of demand for EVs and the rate of subsidy passthrough. Estimates show that demand for EVs amongst low- and middle-income households is price-elastic and pass-through is complete. We use these estimates to calculate the expected subsidy bill required for California to reach its goal of 1.5 million EVs by 2025

Taking Ownership: Our Pledge to Educate All of Detroit's Children

Excellent Schools Detroit represents a broad and diverse cross section of Detroit's education, government, civic and community, parent, organized labor, and philanthropic leaders who are committed to ensuring that all Detroit children receive the great education they deserve. This citywide education plan reflects months of discussions and deliberations by coalition members, as well as a series of six community meetings in November and December, youth focus groups, small group discussions with multiple stakeholders, and other outreach efforts. We appreciate the thoughtful recommendations from the many Detroiters who are as passionate as we are about the need to prepare all students for college, careers, and life in the 21st century

Effect of the relative shift between the electron density and temperature pedestal position on the pedestal stability in JET-ILW and comparison with JET-C

The electron temperature and density pedestals tend to vary in their relative radial positions, as observed in DIII-D (Beurskens et al 2011 Phys. Plasmas 18 056120) and ASDEX Upgrade (Dunne et al 2017 Plasma Phys. Control. Fusion 59 14017). This so-called relative shift has an impact on the pedestal magnetohydrodynamic (MHD) stability and hence on the pedestal height (Osborne et al 2015 Nucl. Fusion 55 063018). The present work studies the effect of the relative shift on pedestal stability of JET ITER-like wall (JET-ILW) baseline low triangularity (\u3b4) unseeded plasmas, and similar JET-C discharges. As shown in this paper, the increase of the pedestal relative shift is correlated with the reduction of the normalized pressure gradient, therefore playing a strong role in pedestal stability. Furthermore, JET-ILW tends to have a larger relative shift compared to JET carbon wall (JET-C), suggesting a possible role of the plasma facing materials in affecting the density profile location. Experimental results are then compared with stability analysis performed in terms of the peeling-ballooning model and with pedestal predictive model EUROPED (Saarelma et al 2017 Plasma Phys. Control. Fusion). Stability analysis is consistent with the experimental findings, showing an improvement of the pedestal stability, when the relative shift is reduced. This has been ascribed mainly to the increase of the edge bootstrap current, and to minor effects related to the increase of the pedestal pressure gradient and narrowing of the pedestal pressure width. Pedestal predictive model EUROPED shows a qualitative agreement with experiment, especially for low values of the relative shift

Interpretative and predictive modelling of Joint European Torus collisionality scans

Transport modelling of Joint European Torus (JET) dimensionless collisionality scaling experiments in various operational scenarios is presented. Interpretative simulations at a fixed radial position are combined with predictive JETTO simulations of temperatures and densities, using the TGLF transport model. The model includes electromagnetic effects and collisions as well as □(→┬E ) X □(→┬B ) shear in Miller geometry. Focus is on particle transport and the role of the neutral beam injection (NBI) particle source for the density peaking. The experimental 3-point collisionality scans include L-mode, and H-mode (D and H and higher beta D plasma) plasmas in a total of 12 discharges. Experimental results presented in (Tala et al 2017 44th EPS Conf.) indicate that for the H-mode scans, the NBI particle source plays an important role for the density peaking, whereas for the L-mode scan, the influence of the particle source is small. In general, both the interpretative and predictive transport simulations support the experimental conclusions on the role of the NBI particle source for the 12 JET discharges