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The responsiveness of self-employment income to tax rate changes

  • Heim, Bradley T.

This paper estimates the extent to which self-employment income responds to changes in the net-of-tax share using a panel of tax returns that spans 1987-1996. The results suggest that the elasticity of reported self-employment income to the net-of-tax share is approximately .9, implying a real elasticity (net of any reporting response) of around .4. Estimated elasticities tend to be larger for higher income taxpayers, married males, and females. In addition, the elasticity of self-employment income is considerably larger than the elasticity wage and salary income estimated using the same methodology.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 6 (December)
Pages: 940-950

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Handle: RePEc:eee:labeco:v:17:y:2010:i:6:p:940-950
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  12. Shih-Ying Wu, 2005. "The Tax Effect on Taxable Income from Privately Held Businesses," Southern Economic Journal, Southern Economic Association, vol. 71(4), pages 891-912, April.
  13. Austan Goolsbee, 1997. "What Happens When You Tax the Rich? Evidence from Executive Compensation," NBER Working Papers 6333, National Bureau of Economic Research, Inc.
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  18. 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.
  19. Robert A Moffitt & Mark Wilhelm, 2000. "Taxation and the Labor Supply - Decisions of the Affluent," Economics Working Paper Archive 414, The Johns Hopkins University,Department of Economics.
  20. Robert Carroll & Douglas Holtz-Eakin & Mark Rider & Harvey S. Rosen, 2001. "Personal Income Taxes and the Growth of Small Firms," NBER Chapters, in: Tax Policy and the Economy, Volume 15, pages 121-148 National Bureau of Economic Research, Inc.
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  28. Naomi E. Feldman & Joel Slemrod, 2007. "Estimating tax noncompliance with evidence from unaudited tax returns," Economic Journal, Royal Economic Society, vol. 117(518), pages 327-352, 03.
  29. Giertz, Seth, 2006. "The Elasticity of Taxable Income During the 1990s: A Sensitivity Analysis," MPRA Paper 17603, University Library of Munich, Germany.
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