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The Effect Of Taxes On Taxable Earnings: Evidence From The 2001 And Related U.S. Federal Tax Acts

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  • Singleton, Perry

Abstract

This study measures the elasticity of taxable earnings to the marginal tax price, identified by a marriage penalty relief provision contained in the Economic Growth and Tax Relief Reconciliation Act of 2001. The change in joint taxable earnings in response to the provision implies a joint elasticity ranging from 0.217 to 0.304. The joint response is driven by the taxable wage earnings of males, and does not reflect a shift in income from tax-deferred to taxable compensation, but an increase in total wage earnings.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 64 (2011)
Issue (Month): 2 (June)
Pages: 323-51

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Handle: RePEc:ntj:journl:v:64:y:2011:i:2:p:323-51

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  1. Emmanuel Saez, 2000. "Using Elasticities to Derive Optimal Income Tax Rates," NBER Working Papers 7628, National Bureau of Economic Research, Inc.
  2. Emmanuel Saez, 1999. "The Effect of Marginal Tax Rates on Income: A Panel Study of 'Bracket Creep'," NBER Working Papers 7367, National Bureau of Economic Research, Inc.
  3. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
  4. Bollinger, Christopher R, 1998. "Measurement Error in the Current Population Survey: A Nonparametric Look," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 576-94, July.
  5. Kopczuk, Wojciech, 2005. "Tax bases, tax rates and the elasticity of reported income," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2093-2119, December.
  6. John Bound & Alan B. Krueger, 1989. "The Extent of Measurement Error In Longitudinal Earnings Data: Do Two Wrongs Make A Right?," NBER Working Papers 2885, National Bureau of Economic Research, Inc.
  7. LaLumia, Sara, 2009. "The Earned Income Tax Credit and Reported Self-Employment Income," National Tax Journal, National Tax Association, vol. 62(2), pages 191-217, June.
  8. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
  9. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
  10. Giertz, Seth, 2007. "The Elasticity of Taxable Income over the 1980s and 1990s," MPRA Paper 18313, University Library of Munich, Germany.
  11. Martin Feldstein, 1993. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the1986 Tax Reform Act," NBER Working Papers 4496, National Bureau of Economic Research, Inc.
  12. Bradley T. Heim, 2009. "The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(1), pages 147-163.
  13. Lindsey, Lawrence B., 1987. "Individual taxpayer response to tax cuts: 1982-1984 : With implications for the revenue maximizing tax rate," Journal of Public Economics, Elsevier, vol. 33(2), pages 173-206, July.
  14. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  15. James Alm & Stacy Dickert-Conlin & Leslie A. Whittington, 1999. "Policy Watch: The Marriage Penalty," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 193-204, Summer.
  16. Thomas S. Dee & William N. Evans, 2003. "Teen Drinking and Educational Attainment: Evidence from Two-Sample Instrumental Variables Estimates," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 178-209, January.
  17. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
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Cited by:
  1. Stevenson, Adam, 2012. "The Labor Supply And Tax Revenue Consequences Of Federal Same-Sex Marriage Legalization," National Tax Journal, National Tax Association, vol. 65(4), pages 783-806, December.
  2. Emmanuel Saez & Joel B. Slemrod & Seth H. Giertz, 2009. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," NBER Working Papers 15012, National Bureau of Economic Research, Inc.
  3. Abby Alpert & David Powell, 2012. "Tax Elasticity of Labor Earnings for Older Individuals," Working Papers wp272, University of Michigan, Michigan Retirement Research Center.

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