Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effect of Anticipated Tax Changes on Intertemporal Labor Supply and the Realization of Taxable Income

Contents:

Author Info

  • Looney, Adam

    (Federal Reserve Board of Governors)

  • Singhal, Monica

    (Harvard U)

Abstract

We use anticipated changes in tax rates associated with changes in family composition to estimate intertemporal labor supply elasticities and elasticities of taxable income with respect to the net-of-tax wage rate. Changes in the ages of children can affect marginal tax rates through provisions of the tax code that are tied to child age and dependent status. We identify behavioral responses to these tax changes by comparing families who experienced a tax rate change to families who had a similar change in dependents but no resulting tax rate change. A primary advantage of our approach is that these changes can be anticipated, allowing us to estimate substitution effects that are not confounded by life-cycle income effects. We estimate an intertemporal elasticity of family labor earnings of 0.75 for families earning between $35,000 and $85,000 in the Survey of Income and Program Participation (SIPP) and find very similar estimates using the IRS-NBER individual tax panel.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP06-031/$File/rwp_06_031_singhal.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP06-031/$File/rwp_06_031_singhal.pdf [302 Found]--> http://web.hks.harvard.edu/publications/workingpapers/Index.aspx). If this is indeed the case, please notify ()
Download Restriction: no

Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp06-031.

as in new window
Length:
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:ecl:harjfk:rwp06-031

Contact details of provider:
Postal: 79 JFK Street, Cambridge, MA 02138
Fax: 617-496-2554
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. 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.
  2. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers, Institute for Fiscal Studies W98/18, Institute for Fiscal Studies.
  3. Joel Slemrod, 1995. "High-Income Families and the Tax Changes of the 1980s: The Anatomy of Behavioral Response," NBER Working Papers 5218, National Bureau of Economic Research, Inc.
  4. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
  5. Kopczuk, Wojciech, 2005. "Tax bases, tax rates and the elasticity of reported income," Journal of Public Economics, Elsevier, Elsevier, vol. 89(11-12), pages 2093-2119, December.
  6. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
  7. Naomi E. Feldman & Peter Katuscak, 2006. "Should the Average Tax Rate Be Marginalized?," CERGE-EI Working Papers wp304, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  8. Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
  9. Miles S. Kimball & Matthew D. Shapiro, 2008. "Labor Supply: Are the Income and Substitution Effects Both Large or Both Small?," NBER Working Papers 14208, National Bureau of Economic Research, Inc.
  10. Eissa, Nada & Hoynes, Hilary Williamson, 1999. "The Earned Income Tax Credit and the Labor Supply of Married Couples," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1024b9z8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Bruce D. Meyer & Dan T. Rosenbaum, 1998. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 32, Northwestern University/University of Chicago Joint Center for Poverty Research.
  12. 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.
  13. Ziliak, J. & Kniesner, T.J., 1995. "Estimating life-cycle labor supply tax effects," Discussion Paper, Tilburg University, Center for Economic Research 1995-89, Tilburg University, Center for Economic Research.
  14. Joseph Altonji, 1984. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 562, Princeton University, Department of Economics, Industrial Relations Section..
  15. 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.
  16. 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.
  17. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
  18. Casey B. Mulligan, 1998. "Substitution over Time: Another Look at Life Cycle Labor Supply," NBER Working Papers 6585, National Bureau of Economic Research, Inc.
  19. Guido W. Imbens & Donald B. Rubin & Bruce Sacerdote, 1999. "Estimating the Effects of Unearned Income on Labor Supply, Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," NBER Working Papers 7001, National Bureau of Economic Research, Inc.
  20. Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
  21. Lawrence H. Summers, 1986. "Some skeptical observations on real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Fall, pages 23-27.
  22. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 765-99, July.
  23. Nada Eissa, 1995. "Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment," NBER Working Papers 5023, National Bureau of Economic Research, Inc.
  24. N. Gregory Mankiw, 1989. "Real Business Cycles: A New Keynesian Perspective," NBER Working Papers 2882, National Bureau of Economic Research, Inc.
  25. MaCurdy, Thomas E, 1981. "An Empirical Model of Labor Supply in a Life-Cycle Setting," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(6), pages 1059-85, December.
  26. Slemrod, Joel, 1995. "Income Creation or Income Shifting? Behavioral Responses to the Tax Reform Act of 1986," American Economic Review, American Economic Association, American Economic Association, vol. 85(2), pages 175-80, May.
  27. Giertz, Seth, 2004. "Recent Literature on Taxable-Income Elasticities," MPRA Paper 16159, University Library of Munich, Germany.
  28. David Card, 1990. "Intertemporal Labor Supply: An Assessment," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 649, Princeton University, Department of Economics, Industrial Relations Section..
  29. Austan Goolsbee, 1997. "What Happens When You Tax the Rich? Evidence from Executive Compensation," NBER Working Papers 6333, National Bureau of Economic Research, Inc.
  30. 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.
  31. Bruce D. Meyer, 2002. "Labor Supply at the Extensive and Intensive Margins: The EITC, Welfare, and Hours Worked," American Economic Review, American Economic Association, American Economic Association, vol. 92(2), pages 373-379, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
  2. Chetty, Nadarajan, 2009. "Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance," Scholarly Articles 9748527, Harvard University Department of Economics.
  3. Jane K. Dokko, 2008. "The effect of taxation on lifecycle labor supply: results from a quasi-experiment," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2008-24, Board of Governors of the Federal Reserve System (U.S.).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp06-031. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.