The Responses of Taxable Income Induced by Tax Cuts – Empirical Evidence from the German Taxpayer Panel
AbstractThe elasticity of taxable income has gained increasing attention as a fiscal policy parameter. This paper provides empirical evidence for Germany and adds to the relatively small body of literature for European countries. We use a large new panel data set to analyze the taxable income response to tax rate changes in 2004 which were part of an extensive reform programme in Germany at the beginning of this century. We find an average elasticity of approximately 0.6. Separately estimated income effects however are mostly small or insignificant. The results vary when dividing taxpayers by income type and group.
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Bibliographic InfoPaper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number 57.
Length: 38 pages
Date of creation: Nov 2009
Date of revision:
elasticity of taxable income; tax reform; net-of-tax rate;
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-EUR-2010-04-17 (Microeconomic European Issues)
- NEP-PBE-2010-04-17 (Public Economics)
- NEP-PUB-2010-04-17 (Public Finance)
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