Three essays on the economics and econometrics of taxation

This dissertation examines three topics in the economics and econometrics of taxation: the effect of tax incentives on charitable giving; the responsiveness of portfolio choices to tax rates; and the positive and normative relationship between changes in pre-tax income inequality and the degree of tax progressivity.; Chapter I estimates the responsiveness of charitable giving to changes in tax incentives and disposable income, using a 1979--1990 panel of tax returns. A new estimation technique is developed for distinguishing transitory from permanent changes in incentives. Twelve-year individual averages of income and deductions are combined with information on legislated changes in tax schedules, in order to construct instruments for permanent variation in tax incentives and disposable income. Differences between current and expected tax rates caused by pre-announced changes in tax law are used to identify transitory variation, and fixed-effects control for unobserved heterogeneity. The results suggest that timing of giving is highly responsive to transitory variation in tax rates, but that long run giving is only moderately responsive to tax rates.; Chapter II estimates the effect of marginal tax rates on financial portfolio allocation, using the 1983--1989 Survey of Consumer Finances (SCF) panel. Cross-sectional estimates suggest that marginal tax rates have a strong influence on portfolio choice. These estimates may suffer from omitted variable bias due to correlation between the marginal tax rate and unobserved influences, such as financial sophistication and preferences for risk or liquidity. The omitted influences may be related to income in a positive and non-linear fashion, so that the marginal tax rate serves as a proxy. Tobit, probit, and linear models of asset demand are estimated with controls for time-invariant unobservables. Controlling for unobserved heterogeneity is found to reduce the magnitude of the tax effects. These results are found to be robust to efforts to distinguish between unobserved heterogeneity and state dependence (i.e., slow adjustment of portfolios).; Chapter III explores theories about how the optimal progressivity of the tax system should change when the distribution of incomes becomes more unequal, provides evidence on recent changes in inequality and tax progressivity, and examines the relationship between theory and evidence.