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The Elasticity of Taxable Income over the 1980s and 1990s

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  • Giertz, Seth

Abstract

Taxable (and broad) income elasticities are estimated using tax return data from 1979 to 2001. Data from the Continuous Work History Survey (CWHS) yield an estimated taxable income elasticity for the 1990s that is about half the corresponding 1980s estimate. Estimates from the full Statistics of Income, which heavily oversamples high–income filers, generally confirm the CWHS results. More sophisticated income control brings the estimates for the two decades closer together—to 0.40 for the 1980s and 0.26 for the 1990s. Work by Kopczuk (2005) implies that the narrowing of the tax base since 1986 could account for 14 to 29 percent of the remaining difference.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18313.

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Date of creation: Dec 2007
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Handle: RePEc:pra:mprapa:18313

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Related research

Keywords: Taxable Income Elasticity; Behavioral Responses to taxation; Efficiency;

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References

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  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. Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
  3. Slemrod, Joel & Kopczuk, Wojciech, 2002. "The optimal elasticity of taxable income," Journal of Public Economics, Elsevier, vol. 84(1), pages 91-112, April.
  4. Giertz, Seth, 2004. "Recent Literature on Taxable-Income Elasticities," MPRA Paper 16159, University Library of Munich, Germany.
  5. Thomas Lemieux, 2006. "Postsecondary Education and Increasing Wage Inequality," American Economic Review, American Economic Association, vol. 96(2), pages 195-199, May.
  6. Jon Bakija, 2006. "Documentation for a Comprehensive Historical U.S. Federal and State Income Tax Calculator Program," Department of Economics Working Papers 2006-02, Department of Economics, Williams College, revised Aug 2009.
  7. Austan Goolsbee, 1999. "Evidence on the High-Income Laffer Curve from Six Decades of Tax Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(2), pages 1-64.
  8. Giertz, Seth, 2005. "A Sensitivity Analysis of the Elasticity of Taxable Income," MPRA Paper 17601, University Library of Munich, Germany.
  9. Imbens, G. & Lancaster, T., 1991. "Efficient Estimation and Stratified Sampling," Papers 9145, Tilburg - Center for Economic Research.
  10. Martin Feldstein & Marian Vaillant, 1994. "Can State Taxes Redistribute Income?," NBER Working Papers 4785, National Bureau of Economic Research, Inc.
  11. Thomas Piketty & Emmanuel Saez, 2006. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," NBER Working Papers 12404, National Bureau of Economic Research, Inc.
  12. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, vol. 95(3), pages 831-849, June.
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Citations

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Cited by:
  1. Blomquist, Sören & Selin, Håkan, 2008. "Hourly Wage Rate and Taxable Labor Income Responsiveness to Changes in Marginal Tax Rates," Working Paper Series, Center for Fiscal Studies 2009:1, Uppsala University, Department of Economics.
  2. Heim, Bradley T., 2010. "The responsiveness of self-employment income to tax rate changes," Labour Economics, Elsevier, vol. 17(6), pages 940-950, December.
  3. Jon Bakija & Adam Cole & Bradley Heim, 2008. "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data," Department of Economics Working Papers 2010-24, Department of Economics, Williams College, revised Jan 2012.
  4. John Creedy & Norman Gemmell, 2011. "Tax Rates and Revenue Changes: Behavioural and Structural Factors," Treasury Working Paper Series 11/05, New Zealand Treasury.
  5. Bev Dahlby & Ergete Ferede, 2012. "The effects of tax rate changes on tax bases and the marginal cost of public funds for Canadian provincial governments," International Tax and Public Finance, Springer, vol. 19(6), pages 844-883, December.
  6. 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.
  7. Hakan Yilmazkuday, 2011. "Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy," Working Papers 1106, Florida International University, Department of Economics.
  8. John Deskins & William Fox, 2008. "Measuring Behavioral Responses to the Property Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0816, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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