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The Impact of Marginal Tax Rates on Taxable Income: Evidence from State Income Tax Differentials

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  • James E. Long
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    Abstract

    The relationship between marginal tax rates and taxable income is analyzed with a large cross section of income tax returns filed by individuals who face different marginal tax rates because of state income tax differentials. The empirical results suggest that an increase in the marginal tax rate reduces taxable income primarily because taxpayers claim larger deductions. High-income taxpayers are found to be more responsive to tax rate changes than lower-income individuals. The findings are compared to those of other recent studies incorporating a wider range of taxpayer responses to tax rate changes than considered in this study.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 65 (1999)
    Issue (Month): 4 (April)
    Pages: 855-869

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    Handle: RePEc:sej:ancoec:v:65:4:y:1999:p:855-869

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    Web page: http://www.southerneconomic.org/
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    Cited by:
    1. Bev Dahlby & Ergete Ferede, 2012. "The effects of tax rate changes on tax bases and the marginal cost of public funds for Canadian provincial governments," International Tax and Public Finance, Springer, vol. 19(6), pages 844-883, December.
    2. Giertz, Seth, 2004. "Recent Literature on Taxable-Income Elasticities," MPRA Paper 16159, University Library of Munich, Germany.
    3. Wojciech Kopczuk, 2003. "Tax Bases, Tax Rates and the Elasticity of Reported Income," NBER Working Papers 10044, National Bureau of Economic Research, Inc.
    4. Moore, Winston, 2008. "The Responsiveness of Taxable Income to Changes in Marginal Tax Rates in Barbados," MPRA Paper 21583, University Library of Munich, Germany.

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