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Do high-income individuals respond to the change in the marginal tax rate? Evidence from Major League Baseball

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  • Sungmun Choi

Abstract

Income taxation affects individuals’ incentives to work, save, and take risks. These behavioural responses to taxation is key to evaluating efficiency cost of taxation. Especially, the response of rich individuals to taxation is important because of their impact on the tax revenue and on the economy. In this paper, I analyse the response of Major League Baseball players to the increase in the top tax rate due to the American Taxpayer Relief Act of 2012. Using difference-in-differences estimation applied to the players with different years of free agent contracts, I do not find any negative effect of the tax increase on the players’ performance.

Suggested Citation

  • Sungmun Choi, 2023. "Do high-income individuals respond to the change in the marginal tax rate? Evidence from Major League Baseball," Applied Economics Letters, Taylor & Francis Journals, vol. 30(19), pages 2765-2768, November.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:19:p:2765-2768
    DOI: 10.1080/13504851.2022.2107160
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    References listed on IDEAS

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    1. Henrik Jacobsen Kleven & Camille Landais & Emmanuel Saez, 2013. "Taxation and International Migration of Superstars: Evidence from the European Football Market," American Economic Review, American Economic Association, vol. 103(5), pages 1892-1924, August.
    2. James Alm & William H. Kaempfer & Edward Batte Sennoga, 2012. "Baseball Salaries and Income Taxes: The "Home Field Advantage" of Income Taxes on Free Agent Salaries," Working Papers 1209, Tulane University, Department of Economics.
    3. 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.
    4. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
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