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Which Elasticity? Estimating the Responsiveness of Taxpayer Reporting Decisions

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  • James Alm

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  • Sally Wallace

Abstract

In this paper we present estimates of the responses of individuals to marginal tax rates in their reporting of income, using data from individual tax returns for the year 1995. One estimation method is ordinary least squares regression. A second method uses quantile regression, which provides evidence on behavioral responses at different points (or quantiles) in the distribution of income and so is relevant to the question of whether the responses of, say, the rich differ from those at other points in the income distribution. Our results clearly indicate that marginal tax rates affect the reporting decisions of individuals. However, there are significant differences in the marginal tax rate reporting responses for the various types of reported income, there are major differences across income classes, and there are notable differences in the estimated responses across estimation methods. Copyright International Atlantic Economic Society 2007

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Bibliographic Info

Article provided by Springer in its journal International Advances in Economic Research.

Volume (Year): 13 (2007)
Issue (Month): 3 (August)
Pages: 255-267

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Handle: RePEc:kap:iaecre:v:13:y:2007:i:3:p:255-267

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Web page: http://www.springerlink.com/link.asp?id=112112

Related research

Keywords: Tax price elasticity; Quantile regression; H20; H30;

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  1. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  2. Buchinsky, Moshe, 1995. "Estimating the asymptotic covariance matrix for quantile regression models a Monte Carlo study," Journal of Econometrics, Elsevier, vol. 68(2), pages 303-338, August.
  3. Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer, vol. 8(2), pages 119-128, March.
  4. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
  5. Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
  6. repec:fth:stanho:e-90-11 is not listed on IDEAS
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