Tax Bunching, Income Shifting and Self-employment
AbstractThis paper proposes a dynamic extension to Saez (2010) bunching formula that allows us to distinguish bunching based on real responses and income shifting. We provide direct evidence of income shifting and pronounced bunching in taxable income for the case of Danish self-employed. If income shifting was neglected in this case, we would conclude that taxable incomes were highly sensitive to changes in marginal tax rates. We show, however, that more than half of the observed bunching in taxable income for the self-employed is driven by intertemporal income shifting, implying a structural elasticity in the range of 0.14-0.20
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 2012-04.
Length: 39 pages
Date of creation: May 2012
Date of revision:
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More information through EDIRC
Self-employment; tax bunching; retained pro?ts; tax avoidance; income shifting;
Other versions of this item:
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-07-14 (Accounting & Auditing)
- NEP-ALL-2012-07-14 (All new papers)
- NEP-IUE-2012-07-14 (Informal & Underground Economics)
- NEP-PBE-2012-07-14 (Public Economics)
- NEP-PUB-2012-07-14 (Public Finance)
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.:
- 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.
- Emmanuel Saez & Joel B. Slemrod & Seth H. Giertz, 2009. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," NBER Working Papers 15012, National Bureau of Economic Research, Inc.
- Raj Chetty & John N. Friedman & Tore Olsen & Luigi Pistaferri, 2010. "Adjustment Costs, Firm Responses, and Labor Supply Elasticities: Evidence from Danish Tax Records," CAM Working Papers 2010-03, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Jarkko Harju & Tuomas Matikka, 2013. "Entrepreneurs and income-shifting: Empirical evidence from a Finnish tax reform," Working Papers 43, Government Institute for Economic Research Finland (VATT).
- Emmanuel Saez, 2010.
"Do Taxpayers Bunch at Kink Points?,"
American Economic Journal: Economic Policy,
American Economic Association, vol. 2(3), pages 180-212, August.
- Jarkko Harju & Tuomas Matikka, 2013. "The elasticity of taxable income and income-shifting between tax bases: what is “real” and what is not?," Working Papers 1313, Oxford University Centre for Business Taxation.
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