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A Sensitivity Analysis of the Elasticity of Taxable Income

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Author Info
Giertz, Seth

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Abstract

This paper applies the methods of Gruber and Saez (2002) to a panel of tax returns spanning 1979 through 2001 in order to examine the sensitivity of the elasticities of taxable and broad income to an array of factors. The paper finds that that Gruber and Saez’s approach yields an estimated elasticity of taxable income (ETI) for the 1990s that is about half the size of this paper’s corresponding estimate for the 1980s. In general, the addition of demographic information has little impact on elasticity estimates for the 1980s, but lowers the 1990s estimates, especially for broad income, which is a more encompassing income measure than is taxable income. Finally, the paper finds that weighting regression results by income not only has a substantial impact on the estimates, but also results in overall estimates that are influenced by a small number of predominately high-income filers. For example, excluding 100 of the most influential observations (just 0.2 percent of the sample) lowers the estimated ETI for the 1980s from 0.37 to 0.11.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17601.

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Date of creation: Feb 2005
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Handle: RePEc:pra:mprapa:17601

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Related research
Keywords: Elasticity of Taxable Income; Behavioral Responses to Taxation; Taxation;

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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
H2 - Public Economics - - Taxation, Subsidies, and Revenue

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.:

  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. [Downloadable!] (restricted)
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  2. Slemrod, Joel & Kopczuk, Wojciech, 2002. "The optimal elasticity of taxable income," Journal of Public Economics, Elsevier, vol. 84(1), pages 91-112, April. [Downloadable!] (restricted)
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  3. Giertz, Seth, 2004. "Recent Literature on Taxable-Income Elasticities," MPRA Paper 16159, University Library of Munich, Germany. [Downloadable!]
  4. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April. [Downloadable!] (restricted)
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  5. Kopczuk, Wojciech, 2005. "Tax bases, tax rates and the elasticity of reported income," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2093-2119, December. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, 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.)

  1. Nada, Eissa & Giertz, Seth, 2006. "Trends in High Incomes and Behavioral Responses to Taxation: Evidence from Executive Compensation and Statistics of Income Data," MPRA Paper 17604, University Library of Munich, Germany. [Downloadable!]
  2. Giertz, Seth, 2006. "The Elasticity of Taxable Income During the 1990s: A Sensitivity Analysis," MPRA Paper 17603, University Library of Munich, Germany. [Downloadable!]
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