**Bunching to Maximize Tax Credits: Evidence from Kinks in the U.S. Tax Schedule**

Joint with Jacob A. Mortenson

We document bunching at tax kinks using a panel of 258 million income tax returns in the United States from 1996 to 2014. During this period, bunching grew by 700%. While most bunchers are self-employed, a substantial number of wage earners also bunch by misreporting income. The vast majority of bunching occurs at kinks maximizing tax credits, particularly at the kink that maximizes taxpayer refunds. Many taxpayers follow the refund-maximizing kink from year to year, selectively maximizing the appropriate tax credit(s). We argue that this behavior is incompatible with recently developed methods for identifying elasticities via bunching patterns.

**The Effects of Required Minimum Distribution Rules on Withdrawals from Traditional Individual Retirement Accounts**

Joint with Jacob A. Mortenson and Heidi Schramm

[online appendix here]

Traditional Individual Retirement Accounts (IRAs) are a substantial source of retirement savings. In 2013, individuals age 60 or older held $3.8 trillion in wealth in IRAs. Under current law, some fraction of these funds must be withdrawn each year beginning

the year one turns 70.5 years of age, with the required fraction increasing in age. We study the effects of these Required Minimum Distribution (RMD) rules on the decumulation behavior of retirees using a 16-year panel of administrative tax data. Our data consist of a 5% random sample of individuals age 60 or older from 1999 to 2014, with approximately 2.6 million individuals per year. This period encompasses a unique policy change that we exploit for identification: a one-year suspension of the RMD rules in 2009. Though the RMD rules are modest – leaving one third of the original balance intact by age 90 even if investments generate zero returns – our empirical analysis shows they have large effects on behavior. We estimate that 52% of individuals subject to the rules would prefer to take an IRA distribution less than their required minimum. However, our estimate for the proportion of constrained individuals who took advantage of the RMD suspension in 2009 is 62%. The remaining 38% did not re-optimize, perhaps due to inattention or other optimization frictions. In addition, we document an extensive margin effect among 70.5-year olds: individuals newly subject to the rules are 28% more likely to close their IRAs relative to other age groups. The findings suggest that there are costs associated with paying attention to the RMD rules and that the rules represent a binding constraint for the majority of retirees with IRAs.

**Estimating the Elasticity of Broad Income for High-Income Taxpayers**

Joint with Laura Kawano and Caroline Weber

This paper precisely estimates the elasticity of broad income (EBI) with respect to the marginal net-of-tax rate for high-income taxpayers. We study the introduction of a new top income tax bracket in 2013 using a large panel of high-income taxpayers drawn from administrative tax records. Our estimation strategy – inverse probability weighting – takes into account the tremendous income volatility experienced by high-income taxpayers. We obtain an intent-to-treat (ITT) EBI of 0.013. After rescaling to account for taxpayers crossing the top income tax bracket threshold, we obtain a treatment-effect-on-the-treated elasticity that is bounded below by the ITT estimate and above by 0.034.

**Optimal Taxation of Internalities: The Role of Market Incentives**

This paper analyzes the optimal taxation of goods when consumers fail to maximize their own utility, imposing internalities on themselves. This can happen due to imperfect information, cognitive bias, or lack of willpower, among other causes. I relax two ubiquitous assumptions found in other work on this topic by studying imperfect competition and the incentive firms have to de-bias consumers. Contrary to standard results, I find that (i) internality correction, even if costless, is not always desirable; (ii) optimal tax rates are generally not equal to marginal internalities; and (iii) firm de-biasing incentives attenuate the optimal internality tax or subsidy.