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The effect of recent tax changes on taxable income: Evidence from a new panel of tax returns

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  • Bradley T. Heim

    (Office of Tax Analysis, U.S. Department of the Treasury)

Abstract

This paper estimates the elasticity of taxable income to the net-of-tax share using a panel of tax returns that follows a random sample of taxpayers from 1999 to 2005, spanning the EGTRRA 2001 and JGTRRA 2003 tax changes. Results suggest that the elasticity of taxable income to the current year's net-of-tax share lies between 0.3 and 0.4 overall, and that the elasticity of a broader measure of income falls between 0.1 and 0.2 overall, with substantially higher elasticities for taxpayers reporting income in excess of $500,000. © 2009 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:jpamgt:v:28:y:2009:i:1:p:147-163
    DOI: 10.1002/pam.20406
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    References listed on IDEAS

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    Cited by:

    1. Doerrenberg, Philipp & Duncan, Denvil, 2014. "Experimental evidence on the relationship between tax evasion opportunities and labor supply," European Economic Review, Elsevier, vol. 68(C), pages 48-70.
    2. Díaz-Caro, Carlos & Onrubia, Jorge, 2018. "How do taxable income responses to marginal tax rates differ by sex, marital status and age? Evidence from Spanish dual income tax," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-25.
    3. Alpert, Abby & Powell, David, 2014. "Estimating Intensive and Extensive Tax Responsiveness: Do Older Workers Respond to Income Taxes?," Working Papers 987-1, RAND Corporation.
    4. Arrazola, María & de Hevia, José & Romero, Desiderio & Sanz-Sanz, José Félix, 2014. "Personal Income Tax Reforms and the Elasticity of Reported Income to Marginal Tax Rates: An Empirical Analysis Applied to Spain," Working Paper Series 3593, Victoria University of Wellington, Chair in Public Finance.
    5. Abby Alpert & David Powell, 2014. "Estimating Intensive and Extensive Tax Responsiveness Do Older Workers Respond to Income Taxes?," Working Papers WR-987-1, RAND Corporation.
    6. Carey, Simon & Creedy, John & Gemmell, Norman & Teng, Josh, 2012. "Regression Estimates of the Elasticity of Taxable Income and the Choice of Instrument," Working Paper Series 2429, Victoria University of Wellington, Chair in Public Finance.
    7. Carey, Simon & Creedy, John & Gemmell, Norman & Teng, Josh, 2012. "Regression Estimates of the Elasticity of Taxable Income and the Choice of Instrument," Working Paper Series 18710, Victoria University of Wellington, Chair in Public Finance.
    8. Carbonell-Nicolau, Oriol & Llavador, Humberto, 2018. "Inequality reducing properties of progressive income tax schedules: the case of endogenous income," Theoretical Economics, Econometric Society, vol. 13(1), January.
    9. Jos順鬩x Sanz-Sanz & Mar𨁁rrazola-Vacas & Nuria Rueda-L󰥺 & Desiderio Romero-Jordᮠ, 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.
    10. Robert McClelland & Shannon Mok, 2012. "A Review of Recent Research on Labor Supply Elasticities: Working Paper 2012-12," Working Papers 43675, Congressional Budget Office.
    11. 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.
    12. Singleton, Perry, 2011. "The Effect of Taxes on Taxable Earnings: Evidence From the 2001 and Related U.S. Federal Tax Acts," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 323-351, June.
    13. Heim, Bradley T., 2010. "The responsiveness of self-employment income to tax rate changes," Labour Economics, Elsevier, vol. 17(6), pages 940-950, December.
    14. Abby Alpert & David Powell, 2020. "Estimating Intensive And Extensive Tax Responsiveness," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1855-1873, October.
    15. Derek Messacar, 2022. "Labor Supply Responses to Income Taxation among Older Couples: Evidence from a Canadian Reform," Cahiers de recherche / Working Papers 10, Institut sur la retraite et l'épargne / Retirement and Savings Institute.
    16. 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.
    17. Carlos Díaz Caro & Jorge Onrubia Fernández, 2015. "Elasticidades de la renta gravable y costes de eficiencia en el IRPF dual," Studies on the Spanish Economy eee2015-02, FEDEA.
    18. 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.
    19. Holmlund Bertil & Söderström Martin, 2011. "Estimating Dynamic Income Responses to Tax Reform," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-38, November.
    20. Duncan, Denvil, 2014. "Behavioral responses and the distributional effects of the Russian ‘flat’ tax," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 226-240.
    21. Emily Y. Lin & Patricia K. Tong, 2017. "Married couple work participation and earnings elasticities: evidence from tax data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 997-1025, December.
    22. Massarrat-Mashhadi, Nima & Werdt, Clive, 2012. "Estimating dynamic income responses to tax changes Massarrat-Mashhadi: Evidence from Germany," Discussion Papers 2012/22, Free University Berlin, School of Business & Economics.
    23. Sarah K. Burns & James P. Ziliak, 2017. "Identifying the Elasticity of Taxable Income," Economic Journal, Royal Economic Society, vol. 127(600), pages 297-329, March.
    24. Arrazola, María & de Hevia, José & Romero, Desiderio & Sanz-Sanz, José Félix, 2014. "Personal Income Tax Reforms and the Elasticity of Reported Income to Marginal Tax Rates: An Empirical Analysis Applied to Spain," Working Paper Series 18851, Victoria University of Wellington, Chair in Public Finance.

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