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Bunching to Maximize Tax Credits: Evidence from Kinks in the US Tax Schedule

Author

Listed:
  • Jacob A. Mortenson
  • Andrew Whitten

Abstract

We explore bunching at US income tax kinks using a panel of 258 million tax returns from 1996 to 2014. We find bunching at seven kinks, with nearly all bunching occurring at kinks maximizing tax credits. In our sample period, the total number of bunchers increased at an 11 percent annualized growth rate, from 134,300 in 1996 to 866,600 in 2014. Approximately two-thirds of these bunchers locate at the unique point that maximizes refunds. Some taxpayers repeatedly bunch at this point, even in consecutive years when different tax kinks are refund maximizing.

Suggested Citation

  • Jacob A. Mortenson & Andrew Whitten, 2020. "Bunching to Maximize Tax Credits: Evidence from Kinks in the US Tax Schedule," American Economic Journal: Economic Policy, American Economic Association, vol. 12(3), pages 402-432, August.
    • Handle: RePEc:aea:aejpol:v:12:y:2020:i:3:p:402-32
    DOI: 10.1257/pol.20180054
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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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