Benjamin B. Lockwood

Benjamin B. Lockwood, Afras Sial, Matthew Weinzierl (2021), Designing, Not Checking, for Policy Robustness: An Example with Optimal Taxation, Tax Policy and the Economy.

Benjamin B. Lockwood (2020), Optimal Income Taxation with Present Bias, American Economic Journal: Economic Policy.

Anna H. Grummon, Benjamin B. Lockwood, Dmitry Taubinsky, Hunt Allcott (2019), Designing Better Sugary Drink Taxes, Science, 365 (6457), pp. 989-990.

Abstract: Taxes on sugar-sweetened beverages (SSBs), such as soda and bottled iced tea, are an increasingly popular approach to reducing obesity, diabetes, and other health harms. As of mid-2019, 42 countries and seven U.S. cities have implemented SSB taxes. A basic economic principle is that such corrective taxes should be proportional to the harm caused. The harm from sugary drinks comes from the sugar, and SSBs vary substantially in sugar per unit volume. Yet SSB taxes typically set constant rates per unit volume; only three SSB taxes worldwide are proportional to sugar content. For example, the seven U.S. cities that tax SSBs use volumetric taxes of 34 to 68 cents per liter of liquid (1 to 2 cents per ounce) instead of, say, 0.5 cents per gram of sugar. These volumetric SSB taxes are poorly targeted to the actual health harms from SSBs. We estimate that a simple design change—taxing the amount of sugar in a drink, not the volume of liquid that accompanies the sugar—could boost a SSB tax's health benefits and overall economic gains by roughly 30%.

Hunt Allcott, Benjamin B. Lockwood, Dmitry Taubinsky (2019), Regressive Sin Taxes, with an Application to the Optimal Soda Tax, Quarterly Journal of Economics.

Abstract: A common objection to “sin taxes”—corrective taxes on goods that are thought to be overconsumed, such as cigarettes, alcohol, and sugary drinks—is that they often fall disproportionately on low-income consumers. This paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework and delivers empirically implementable formulas for sufficient statistics for the optimal commodity tax. The optimal sin tax is increasing in the price elasticity of demand, increasing in the degree to which lower-income consumers are more biased or more elastic to the tax, decreasing in the extent to which consumption is concentrated among the poor, and decreasing in income effects, because income effects imply that commodity taxes create labor supply distortions. Contrary to common intuitions, stronger preferences for redistribution can increase the optimal sin tax, if lower-income consumers are more responsive to taxes or are more biased. As an application, we estimate the optimal nationwide tax on sugar-sweetened beverages, using Nielsen Homescan data and a specially designed survey measuring nutrition knowledge and self-control. Holding federal income tax rates constant, our estimates imply an optimal federal sugar-sweetened beverage tax of 1 to 2.1 cents per ounce, although optimal city-level taxes could be as much as 60% lower due to cross-border shopping.

Hunt Allcott, Benjamin B. Lockwood, Dmitry Taubinsky (2019), Should We Tax Soda? An Overview of Theory and Evidence, Journal of Economic Perspectives, 33 (3), pp. 202-227.

Abstract: Taxes on sugar-sweetened beverages (SSBs) are growing in popularity and have generated an active public debate. Are they a good idea? If so, how high should they be? Are such taxes regressive? Americans and some others around the world consume a remarkable amount of SSBs, and the evidence suggests that this generates significant health costs. Building on recent work by Allcott, Lockwood, and Taubinsky (2018) and others, we review the basic economic principles for an optimal sin tax on SSBs. The optimal tax depends on (1) externalities: uninternalized costs to the health system from SSB consumption; (2) internalities: costs consumers impose on themselves by overconsuming sweetened beverages due to poor nutrition knowledge or lack of self-control; and (3) regressivity: how much the financial burden and the internality benefits from the tax fall on the poor. We then summarize the empirical evidence on the key parameters that determine how large the tax should be, which suggests that SSB taxes can be welfare enhancing. We end with seven concrete suggestions for policymakers considering an SSB tax.

Hunt Allcott, Benjamin B. Lockwood, Dmitry Taubinsky (2018), Ramsey Strikes Back: Optimal Commodity Taxes and Redistribution in the Presence of Salience Effects, American Economic Association Papers and Proceedings, 108, pp. 88-92. 10.1257/pandp.20181040

Abstract: An influential result in modern optimal tax theory, the Atkinson and Stiglitz (1976) theorem, holds that for a broad class of utility functions, all redistribution should be carried out through labor income taxation, rather than differential taxes on commodities or capital. An important requirement for that result is that commodity taxes are known and fully salient when consumers make income-determining choices. This paper allows for the possibility consumers may be inattentive to (or unaware of) some commodity taxes when making choices about income. We show that commodity taxes are useful for redistribution in this setting. In fact, the optimal commodity taxes essentially follow the classic “many person Ramsey rule” (Diamond 1975), scaled by the degree of inattention. As a result, to the extent that commodity taxes are not (fully) salient, goods should be taxed when they are less elastically consumed, and when they are consumed primarily by richer consumers. We extend this result to the setting of corrective taxes, and show how nonsalient corrective taxes should be adjusted for distributional reasons.

Benjamin B. Lockwood, Charles Nathanson, E. Glen Weyl (2017), Taxation and the Allocation of Talent, Journal of Political Economy, 125 (5), pp. 1635-1682. 10.1086/693393

Abstract: Taxation affects the allocation of talented individuals across professions by blunting material incentives and thus magnifying nonpecuniary incentives of pursuing a “calling.” Estimates from the literature suggest that high-paying professions have negative externalities, whereas low-paying professions have positive externalities. A calibrated model therefore prescribes negative marginal tax rates on middle-class incomes and positive rates on the rich. The welfare gains from implementing such a policy are small and are dwarfed by the gains from profession-specific taxes and subsidies. These results depend crucially on externality estimates and labor substitution patterns across professions, both of which are very uncertain given existing empirical evidence.

Benjamin B. Lockwood and Matthew Weinzierl (2016), Positive and normative judgments implicit in U.S. tax policy, and the costs of unequal growth and recessions, Journal of Monetary Economics, 77, pp. 30-47.

Benjamin B. Lockwood and Matthew Weinzierl (2015), De Gustibus non est Taxandum: Heterogeneity in preferences and optimal redistribution, Journal of Public Economics, 124, pp. 74-80.

Jonah Rockoff and Benjamin B. Lockwood (2010), Stuck in the Middle: Impacts of Grade Configuration in Public Schools, Journal of Public Economics, 94 (11-12), pp. 1051-1061.