Comparing the effects of discretionary tax changes between the US and the UK

Abstract

Abstract The remarkable similarities of the effects of discretionary tax changes between the US and the UK, shown in (Cloyne, J. 2013. “Discretionary Tax Changes and the Macroeconomy: New Narrative Evidence from the United Kingdom. American Economic Review 103: 1507–1528.), raise the obvious concern whether the effects of tax changes at disaggregated levels in the UK still resemble those in the US. This paper investigates the issue along three dimensions – corporate and personal income tax changes, anticipated and unanticipated tax changes, and positive and negative tax changes. An important contribution of this paper is to construct a data set on exogenous changes of corporate and personal income taxes in the UK, identified from narrative sources along the lines of Cloyne (2013).