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The elasticity of taxable income in New Zealand: Evidence from the 1986 tax reform

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  • Alastair Thomas
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    Abstract

    This paper uses the 1986 New Zealand tax reform as a ‘natural experiment’ to estimate the elasticity of taxable income for New Zealand. Adopting the methodology of Auten and Carroll (1999), elasticity estimates ranging from 0.34 to 0.52 are obtained. These results imply a significant behavioural response to tax rate changes well in excess of that implied by standard labour supply elasticity estimates, and suggest that the welfare costs of taxation in New Zealand are larger than may have previously been considered.

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    File URL: http://hdl.handle.net/10.1080/00779954.2012.658203
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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal New Zealand Economic Papers.

    Volume (Year): 46 (2012)
    Issue (Month): 2 (January)
    Pages: 159-167

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    Handle: RePEc:taf:regstd:v:46:y:2012:i:2:p:159-167

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