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The Impact of Marginal Tax Rates on Taxable Income: Evidence from State Income Tax Differentials

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  • James E. Long

Abstract

The relationship between marginal tax rates and taxable income is analyzed with a large cross section of income tax returns filed by individuals who face different marginal tax rates because of state income tax differentials. The empirical results suggest that an increase in the marginal tax rate reduces taxable income primarily because taxpayers claim larger deductions. High‐income taxpayers are found to be more responsive to tax rate changes than lower‐income individuals. The findings are compared to those of other recent studies incorporating a wider range of taxpayer responses to tax rate changes than considered in this study.

Suggested Citation

  • James E. Long, 1999. "The Impact of Marginal Tax Rates on Taxable Income: Evidence from State Income Tax Differentials," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 855-869, April.
    • Handle: RePEc:wly:soecon:v:65:y:1999:i:4:p:855-869
    DOI: 10.1002/j.2325-8012.1999.tb00204.x
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    References listed on IDEAS

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    Cited by:

    1. Rubolino, Enrico, 2019. "The efficiency and distributive effects of local taxes: evidence from Italian municipalities," ISER Working Paper Series 2019-02, Institute for Social and Economic Research.

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