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Is there bunching in personal income tax? A legal-economic analysis of the Reduction of Net Work Income

Author

Listed:
  • José Torres Remírez

    (Universidad Católica San Antonio de Murcia)

  • Carlos Teruel Fernández

    (Universidad Católica San Antonio de Murcia)

Abstract

This article aims to estimate whether a measure focused on the reduction of personal income tax for low-income groups - the reduction of net income from work (in its current wording between 2007 and 2016) - could lead to bunching behavior, that is, grouping strategic of taxpayers in certain values of income distribution. To achieve this goal, the methodology proposed by Saez (2010) is followed, and the tax microdata base provided by the Personal Income Tax Filers Panel (2007-2016) is used. The results obtained do not seem to support (except in very specific cases) the existence of the aforementioned behavioral change.

Suggested Citation

  • José Torres Remírez & Carlos Teruel Fernández, 2025. "Is there bunching in personal income tax? A legal-economic analysis of the Reduction of Net Work Income," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 104, pages 283-316, November.
    • Handle: RePEc:lde:journl:y:2025:i:104:p:283-316
    DOI: 10.17533/udea.le.n104a358868
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    Keywords

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    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • 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

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