August 24,2011

Jerry Tempalski at Treasury’s Office of Tax Analysis has put together an amazing time series of the revenue effects of major tax legislation going back to 1940.  Doing this on a consistent basis is more challenging than you might imagine, and Jerry’s study discusses some of the limitations of his data.

But the dataset is enormously valuable, and Treasury recently published updated data through 2010.  The data are available at http://www.treasury.gov/resource-center/tax-policy/Documents/OTA-Rev-Effects-1940-present-6-6-2011.pdf.  If you don’t like the way I presented the data, you can now crunch the numbers yourself and show them in a way you find most meaningful.

You could even try to tease out the economic effects of major tax changes, although that’s problematic with these data for at least two reasons.  First, a $100 billion tax change could have very different economic effects depending on how much is accomplished through rate changes and how much through changes in the tax base and tax credits (and some base changes, like the ones that created enormous tax shelter opportunities in 1981, can have much different effect from relatively innocuous changes).  Second, so much else changes over time that you would need more control variables than data points.  (There’s also the problem that the actual structure of macroeconomic relationships changes over time, so  a model that assumes constant parameters is simply misspecified.)