IDEAS home Printed from https://ideas.repec.org/a/ntj/journl/v61y2008i3p345-64.html
   My bibliography  Save this article

The 2001 and 2003 Tax Rate Reductions: An Overview and Estimate of the Taxable Income Response

Author

Listed:
  • Auten, Gerald
  • Carroll, Robert
  • Gee, Geoffrey

Abstract

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) incorporated the main elements of the Bush Administration’s tax proposals. The principal feature of this legislation was the reduction in individual income tax rates. Reducing marginal tax rates was intended to improve the economic incentives to work and invest, reduce the other economic distortions associated with high tax rates, lower overall tax burdens and improve the prospects for economic growth. The paper examines the effects of the lower marginal tax rates by estimating the response of reported taxable income to the lower rates. Using a panel of tax returns spanning the enactment of EGTRRA and JGTRRA, the paper estimates a taxable income elasticity in the base model of about 0.4, with estimates for other specifications and samples ranging from about 0.2 to 0.7.

Suggested Citation

  • Auten, Gerald & Carroll, Robert & Gee, Geoffrey, 2008. "The 2001 and 2003 Tax Rate Reductions: An Overview and Estimate of the Taxable Income Response," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(3), pages 345-364, September.
  • Handle: RePEc:ntj:journl:v:61:y:2008:i:3:p:345-64
    as

    Download full text from publisher

    File URL: https://www.ntanet.org/NTJ/61/3/ntj-v61n03p345-64-2001-2003-tax-rate.pdf
    Download Restriction: Access to most recent volumes (current and past two years) is restricted to subscribers and members of the National Tax Association.

    File URL: https://www.ntanet.org/NTJ/61/3/ntj-v61n03p345-64-2001-2003-tax-rate.html
    Download Restriction: Access to most recent volumes (current and past two years) is restricted to subscribers and members of the National Tax Association.

    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. Austan Goolsbee, 2000. "What Happens When You Tax the Rich? Evidence from Executive Compensation," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 352-378, April.
    2. 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.
    3. Robert Carroll & Warren Hrung, 2005. "What Does the Taxable Income Elasticity Say About Dynamic Responses to Tax Changes?," American Economic Review, American Economic Association, vol. 95(2), pages 426-431, May.
    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. Lang (Kate) Yang & Bradley T. Heim, 2017. "Responsiveness of Income to Local Income Taxes: Evidence from Indiana," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(2), pages 367-392, June.
    2. 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.
    3. Gorry, Aspen & Hassett, Kevin A. & Hubbard, R. Glenn & Mathur, Aparna, 2017. "The response of deferred executive compensation to changes in tax rates," Journal of Public Economics, Elsevier, vol. 151(C), pages 28-40.

    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. Carina Neisser, 2017. "The elasticity of taxable income: A meta-regression analysis," Working Papers 2017/10, Institut d'Economia de Barcelona (IEB).
    2. 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.
    3. Kateřina Gawthorpe, 2015. "Elasticity of taxable income. A case study for the Czech Republic," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2015(3), pages 18-29.
    4. Mark Rider, 2006. "The Effect of Personal Income Tax Rates on Individual and Business Decisions - A Review of the Evidence," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0615, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421, Elsevier.
    6. 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.
    7. Jukka Pirttilä & Håkan Selin, 2006. "How Successful is the Dual Income Tax? Evidence from the Finnish Tax Reform of 1993," CESifo Working Paper Series 1875, CESifo.
    8. Lang (Kate) Yang & Bradley T. Heim, 2017. "Responsiveness of Income to Local Income Taxes: Evidence from Indiana," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(2), pages 367-392, June.
    9. 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.
    10. 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;International Institute of Public Finance, vol. 19(6), pages 844-883, December.
    11. 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.
    12. Michaël Sicsic, 2020. "Does Labor Income React more to Income Tax or Means-Tested Benefit Reforms?," TEPP Working Paper 2020-03, TEPP.
    13. Jorge Onrubia?Fernández & José Félix Sanz?Sanz, 2009. "Reported Taxable Income and Marginal Tax Rates: Evidence for Spain Based on the Fiscal Drag," Department of Economics - Working Papers Series 1075, The University of Melbourne.
    14. Áron Kiss & Pálma Mosberger, 2015. "The elasticity of taxable income of high earners: evidence from Hungary," Empirical Economics, Springer, vol. 48(2), pages 883-908, March.
    15. Bradley T. Heim, 2009. "The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(1), pages 147-163.
    16. Moore, Winston, 2008. "The Responsiveness of Taxable Income to Changes in Marginal Tax Rates in Barbados," MPRA Paper 21583, University Library of Munich, Germany.
    17. Michael R. Veall, 2006. "The Top Shares of Older Earners in Canada," Social and Economic Dimensions of an Aging Population Research Papers 156, McMaster University.
    18. Robert Carroll & Warren Hrung, 2005. "What Does the Taxable Income Elasticity Say About Dynamic Responses to Tax Changes?," American Economic Review, American Economic Association, vol. 95(2), pages 426-431, May.
    19. Jos順鬩x Sanz-Sanz & Mar, 2015. "Reported gross income and marginal tax rates: estimation of the behavioural reactions of Spanish taxpayers," Applied Economics, Taylor & Francis Journals, vol. 47(5), pages 466-484, January.
    20. Schmidt, Thomas-Patrick & Müller, Heiko, 2012. "Die Elastizitat des zu versteuernden Einkommens in Deutschland: Eine empirische Untersuchung auf Basis des deutschen Taxpayer-Panels," arqus Discussion Papers in Quantitative Tax Research 132, arqus - Arbeitskreis Quantitative Steuerlehre.

    More about this item

    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:ntj:journl:v:61:y:2008:i:3:p:345-64. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sally Sztrecska). General contact details of provider: https://www.ntanet.org/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.