Asymmetric tax multipliers

Using recently published tax series by Romer and Romer (2010) and Cloyne (2013) we examine whether or not positive and negative tax shocks have asymmetric effects on the U.S. and U.K. economies. We find that in the U.S. positive tax shocks—tax increases—do not affect output while negative tax shocks—tax cuts—have large, positive effects. In the U.K., tax increases substantially reduce output while tax cuts have no significant effect.