Personal Tax Changes and Financial Well-being: Evidence from the Tax Cuts and Jobs Act

Christine L. Dobridge, Joanne Hsu and Mike Zabek
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Christine L. Dobridge: https://www.federalreserve.gov/econres/christine-l-dobridge.htm

No 2024-029, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We estimate the effects of personal income tax decreases on financial well-being, including qualitative subjective assessments and quantitative measures. A plausibly causal design shows that tax decreases in the Tax Cuts and Jobs Act made survey respondents more likely to say they were "living comfortably" financially, with null effects at lower levels of subjective financial well-being. Estimates from a similar design using credit bureau data show that people who had larger tax decreases were modestly more likely to open new accounts, and more likely to have higher consumer credit balances. Tax decreases had effects on credit scores that are indistinguishable from zero. Results suggest that larger tax decreases improve financial well-being in ways not fully proxied by typical administrative data.

Keywords: Taxes; Subjective well-being; Household finances; Credit; Financial well-being (search for similar items in EconPapers)
JEL-codes: G50 H24 I31 (search for similar items in EconPapers)
Pages: 50 p.
Date: 2024-05-14
New Economics Papers: this item is included in nep-inv, nep-pbe and nep-pub
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https://www.federalreserve.gov/econres/feds/files/2024029pap.pdf (application/pdf)

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Working Paper: Personal Tax Changes and Financial Well-Being: Evidence from the Tax Cuts and Jobs Act (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-29

DOI: 10.17016/FEDS.2024.029

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