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The Effect of Changes in the Tax Structure on the Reported Income of High-Income Individuals


  • Hernan Acuna

    (Planning Ministry of Chile, Santiago, Chile)

  • Randall G. Holcombe

    (Florida State University, Tallahassee, FL, USA,


Tax incidence theory shows how taxes initially placed on one group can be shifted and ultimately borne by others. This paper shows that income of high-income taxpayers is affected both by the rates they face and by the rates faced by non-high-income taxpayers. The income of high-income taxpayers rises when they face lower tax rates, but also rises in response to lower tax rates imposed on non-high-income taxpayers. While high-income responses to own statutory tax changes may be explained—at least partially—by their making a ‘‘smart use of the tax code,’’ high-income responses to tax changes on non-high income individuals indicate the presence of structural effects of tax changes.

Suggested Citation

  • Hernan Acuna & Randall G. Holcombe, 2010. "The Effect of Changes in the Tax Structure on the Reported Income of High-Income Individuals," Public Finance Review, , vol. 38(3), pages 321-345, May.
  • Handle: RePEc:sae:pubfin:v:38:y:2010:i:3:p:321-345

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