IDEAS home Printed from https://ideas.repec.org/a/kap/iaecre/v13y2007i3p255-26710.1007-s11294-007-9096-9.html
   My bibliography  Save this article

Which Elasticity? Estimating the Responsiveness of Taxpayer Reporting Decisions

Author

Listed:
  • James Alm
  • Sally Wallace

Abstract

In this paper we present estimates of the responses of individuals to marginal tax rates in their reporting of income, using data from individual tax returns for the year 1995. One estimation method is ordinary least squares regression. A second method uses quantile regression, which provides evidence on behavioral responses at different points (or quantiles) in the distribution of income and so is relevant to the question of whether the responses of, say, the rich differ from those at other points in the income distribution. Our results clearly indicate that marginal tax rates affect the reporting decisions of individuals. However, there are significant differences in the marginal tax rate reporting responses for the various types of reported income, there are major differences across income classes, and there are notable differences in the estimated responses across estimation methods. Copyright International Atlantic Economic Society 2007

Suggested Citation

  • James Alm & Sally Wallace, 2007. "Which Elasticity? Estimating the Responsiveness of Taxpayer Reporting Decisions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(3), pages 255-267, August.
    • Handle: RePEc:kap:iaecre:v:13:y:2007:i:3:p:255-267:10.1007/s11294-007-9096-9
    DOI: 10.1007/s11294-007-9096-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11294-007-9096-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11294-007-9096-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
    3. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    4. Gerald Auten & Robert Carroll, 1999. "The Effect Of Income Taxes On Household Income," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 681-693, November.
    5. Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 119-128, March.
    6. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    7. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    8. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
    9. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-458, March.
    10. Buchinsky, Moshe, 1995. "Estimating the asymptotic covariance matrix for quantile regression models a Monte Carlo study," Journal of Econometrics, Elsevier, vol. 68(2), pages 303-338, August.
    11. Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(4), pages 773-788, December.
    12. Martin Feldstein & James M. Poterba, 1996. "Empirical Foundations of Household Taxation," NBER Books, National Bureau of Economic Research, Inc, number feld96-1, March.
    13. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eleni A. Kaditi & Elisavet I. Nitsi, 2013. "Recent Evidence on the Taxpayers’ Reporting Decision in Greece: A Quantile Regression Approach," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 3-24.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Benjamin Russo, 2009. "Innovation and the Long‐Run Elasticity of Total Taxable Income," Southern Economic Journal, John Wiley & Sons, vol. 75(3), pages 798-828, January.
    2. Kristoffer Berg & Thor O. Thoresen, 2020. "Problematic response margins in the estimation of the elasticity of taxable income," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 721-752, June.
    3. Jukka Pirttilä & Håkan Selin, 2006. "How Successful is the Dual Income Tax? Evidence from the Finnish Tax Reform of 1993," Working Papers 223, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    4. Adam Looney & Monica Singhal, 2005. "The effect of anticipated tax changes on intertemporal labor supply and the realization of taxable income," Finance and Economics Discussion Series 2005-44, Board of Governors of the Federal Reserve System (U.S.).
    5. Triest, Robert K., 1998. "Econometric Issues in Estimating the Behavioral Response to Taxation: A Nontechnical Introduction," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 761-72, December.
    6. Emmanuel Saez, 2004. "Reported Incomes and Marginal Tax Rates, 1960–2000: Evidence and Policy Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 117-174, National Bureau of Economic Research, Inc.
    7. 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.
    8. Aspen Gorry & Kevin A. Hassett & R. Glenn Hubbard & Aparna Mathur, 2017. "The Response of Deferred Executive Compensation to Changes in Tax Rates," NBER Chapters, in: Personal Income Taxation and Household Behavior (TAPES), National Bureau of Economic Research, Inc.
    9. 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.
    10. Sillamaa, Mary-Anne & Veall, Michael R., 2001. "The effect of marginal tax rates on taxable income: a panel study of the 1988 tax flattening in Canada," Journal of Public Economics, Elsevier, vol. 80(3), pages 341-356, June.
    11. Seth H. Giertz, 2008. "A Sensitivity Analysis of the Elasticity of Taxable Income: Working Paper 2008-01," Working Papers 19435, Congressional Budget Office.
    12. Triest, Robert K., 1998. "Econometric Issues in Estimating the Behavioral Response to Taxation: A Nontechnical Introduction," National Tax Journal, National Tax Association;National Tax Journal, vol. 51(4), pages 761-772, December.
    13. repec:kap:iaecre:v:13:y:2007:i:3:p:255-267 is not listed on IDEAS
    14. Seth H. Giertz, 2004. "Recent Literature on Taxable-Income Elasticities: Technical Paper 2004-16," Working Papers 16189, Congressional Budget Office.
    15. Miguel Almunia & David Lopez-Rodriguez, 2019. "The elasticity of taxable income in Spain: 1999–2014," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 281-320, November.
    16. Philipp Doerrenberg & Andreas Peichl & Sebastian Siegloch, 2017. "The Elasticity of Taxable Income in the Presence of Deduction Possibilities," NBER Chapters, in: Personal Income Taxation and Household Behavior (TAPES), National Bureau of Economic Research, Inc.
    17. Blomquist, Sören & Selin, Håkan, 2010. "Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 878-889, December.
    18. Doerrenberg, Philipp & Peichl, Andreas & Siegloch, Sebastian, 2014. "Sufficient Statistic or Not? The Elasticity of Taxable Income in the Presence of Deduction Possibilities," IZA Discussion Papers 8554, Institute of Labor Economics (IZA).
    19. Karel Mertens & José Luis Montiel Olea, 2018. "Marginal Tax Rates and Income: New Time Series Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(4), pages 1803-1884.
    20. Slemrod, Joel & Kopczuk, Wojciech, 2002. "The optimal elasticity of taxable income," Journal of Public Economics, Elsevier, vol. 84(1), pages 91-112, April.
    21. Emmanuel Saez & Michael R. Veall, 2003. "The Evolution of High Incomes in Canada, 1920-2000," NBER Working Papers 9607, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Tax price elasticity; Quantile regression; H20; H30;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iaecre:v:13:y:2007:i:3:p:255-267:10.1007/s11294-007-9096-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.