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The elasticity of taxable income of high earners: evidence from Hungary

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  • Áron Kiss

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  • Pálma Mosberger

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Abstract

The paper studies how high-income taxpayers responded to the introduction of the “extraordinary tax on individuals” in Hungary in 2007. The study is based on a panel of tax returns containing information on 10 % of tax filers from 2005 and three subsequent years. We estimate the elasticity of taxable income with respect to the marginal net-of-tax rate and find that the taxable income of Hungarian high earners is moderately responsive to taxation: the estimated elasticity is about 0.24. We also find evidence for a sizeable income effect. The estimated effect is not caused by income shifting. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • 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.
  • Handle: RePEc:spr:empeco:v:48:y:2015:i:2:p:883-908
    DOI: 10.1007/s00181-014-0809-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Neisser, Carina, 2017. "The elasticity of taxable income: A meta-regression analysis," ZEW Discussion Papers 17-032, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Michal Horvath & Matus Senaj & Zuzana Siebertova & Norbert Svarda & Jana Valachyova, 2018. "Evaluating the Aggregate Effects of Tax and Benefit Reforms," Working Papers Working Paper No. 1/2018, Council for Budget Responsibility.
    3. Norbert Švarda, 2015. "The End of the Flat Tax Experiment in Slovakia," Discussion Papers 33, Central European Labour Studies Institute (CELSI).
    4. Miyazaki, Takeshi & Ishida, Ryo, 2016. "Estimating the Elasticity of Taxable Income: Evidence from Top Japanese Taxpayers," MPRA Paper 74623, University Library of Munich, Germany.
    5. Rafal Kierzenkowski, 2012. "Towards a More Inclusive Labour Market in Hungary," OECD Economics Department Working Papers 960, OECD Publishing.
    6. Gábor Kátay & Péter Benczúr & Áron Kiss & Olivér M. Rácz, 2014. "Income Taxation, Transfers and Labour Supply at the Extensive Margin," EcoMod2014 6925, EcoMod.
    7. Elek, Péter & Lőrincz, László, 2015. "Az effektív társasági adókulcs rugalmassága Magyarországon a 2009-2011 közötti adókulcscsökkentés alapján
      [The elasticity of the effective corporate tax rate in Hungary: evidence from the tax cut b
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 27-47.

    More about this item

    Keywords

    Taxable income elasticity; Personal income tax; Tax avoidance; Income shifting; Income effect; H20; H24; H31; J22;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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