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The Effect of Changes in the Tax Structure on the Reported Income of High-Income Individuals


Author Info

  • Hernan Acuna

    (Planning Ministry of Chile, Santiago, Chile)

  • Randall G. Holcombe

    (Florida State University, Tallahassee, FL, USA)

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    Tax incidence theory shows how taxes initially placed on one group can be shifted and ultimately borne by others. This paper shows that income of high-income taxpayers is affected both by the rates they face and by the rates faced by non-high-income taxpayers. The income of high-income taxpayers rises when they face lower tax rates, but also rises in response to lower tax rates imposed on non-high-income taxpayers. While high-income responses to own statutory tax changes may be explained-at least partially---by their making a "smart use of the tax code," high-income responses to tax changes on non-high income individuals indicate the presence of structural effects of tax changes.

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    Bibliographic Info

    Article provided by in its journal Public Finance Review.

    Volume (Year): 38 (2010)
    Issue (Month): 3 (May)
    Pages: 321-345

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    Handle: RePEc:sae:pubfin:v:38:y:2010:i:3:p:321-345

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    Related research

    Keywords: tax shifting; income taxation; progressive taxation;


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