How Successful is the Dual Income Tax? Evidence from the Finnish Tax Reform of 1993
Dual income tax systems have become increasingly popular; yet, relatively little is known about the consequences of implementing such tax systems. This paper uses a representative panel of taxpayers from the 1993 Finnish tax reform to measure how overall taxable income and the relative shares of capital income and labour income reacted to the reform. The Finnish tax reform appears to be particularly suitable for analysing the effect of separating labour and capital income tax bases. The reform radically reduced the marginal tax rates on capital income to some, but not all, taxpayers, while the taxation of labour income was not reformed at the same time. We find that the reform led to a small positive impact on overall taxable income, but part of the positive response was probably offset by income shifting among the self-employed.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.deEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thor O. Thoresen & Karl Ove Aarbu, 1999.
"Income Responses to Tax Changes – Evidence from the Norwegian Tax Reform,"
260, Research Department of Statistics Norway.
- Aarbu, Karl O. & Thoresen, Thor O., 2001. "Income Responses to Tax Changes--Evidence from the Norwegian Tax Reform," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 319-38, June.
- Lindhe, Tobias & Södersten, Jan & Öberg, Ann, 2001.
"Economic Effects of Taxing Closed Corporations under a Dual Income Tax,"
Working Paper Series
2001:16, Uppsala University, Department of Economics.
- Lindhe, T. & Sodersten, J. & Oberg, A., 2001. "Economic Effects of Taxing Closed Corporations under a Dual Income Tax," Papers 2001:16, Uppsala - Working Paper Series.
- Robert Carroll & Warren Hrung, 2005. "What Does the Taxable Income Elasticity Say About Dynamic Responses to Tax Changes?," American Economic Review, American Economic Association, vol. 95(2), pages 426-431, May.
- Roger H. Gordon & Jeffrey K. MacKie-Mason, 1992.
"Tax Distortions to the Choice of Organizational Form,"
NBER Working Papers
4227, National Bureau of Economic Research, Inc.
- Gordon, Roger H. & MacKie-Mason, Jeffrey K., 1994. "Tax distortions to the choice of organizational form," Journal of Public Economics, Elsevier, vol. 55(2), pages 279-306, October.
- Gordon, R.H. & Mackie-Mason, J.K., 1993. "Tax Distorsions to the Choice of Organizational Form," Memorandum 21/1993, Oslo University, Department of Economics.
- Roger H. Gordon & Jeffrey K. MacKie--Mason, 1994. "Tax Distortions to the Choice of Organizational Form," Public Economics 9401004, EconWPA, revised 18 Jan 1994.
- Erik Fjaerli & Diderik Lund, 2001. "The choice between owner's wages and dividends under the dual income tax," Finnish Economic Papers, Finnish Economic Association, vol. 14(2), pages 104-119, Autumn.
- Peter Sørensen, 2005. "Neutral Taxation of Shareholder Income," International Tax and Public Finance, Springer, vol. 12(6), pages 777-801, November.
- Gerald Auten & Robert Carroll, 1999. "The Effect Of Income Taxes On Household Income," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 681-693, November.
- Roger H. Gordon & Joel Slemrod, 1998. "Are "Real" Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?," NBER Working Papers 6576, National Bureau of Economic Research, Inc.
- Valkonen, Tarmo, . "The Finnish Corporate and Capital Income Tax Reform. A General Equilibrium Approach," ETLA A, The Research Institute of the Finnish Economy, number 29.
- Giertz, Seth, 2006. "The Elasticity of Taxable Income During the 1990s: A Sensitivity Analysis," MPRA Paper 17603, University Library of Munich, Germany.
- Joel Slemrod, 1998.
"A General Model of the Behavioral Response to Taxation,"
NBER Working Papers
6582, National Bureau of Economic Research, Inc.
- Joel Slemrod, 2001. "A General Model of the Behavioral Response to Taxation," International Tax and Public Finance, Springer, vol. 8(2), pages 119-128, March.
- Hansson, Åsa, 2004. "Taxpayers Responsiveness to Tax Rate Changes and Implications for the Cost of Taxation," Working Papers 2004:5, Lund University, Department of Economics.
- Gruber, Jon & Saez, Emmanuel, 2002.
"The elasticity of taxable income: evidence and implications,"
Journal of Public Economics,
Elsevier, vol. 84(1), pages 1-32, April.
- Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
- Erik Fj�rli, 2004. "Tax Reform and the Demand for Debt," International Tax and Public Finance, Springer, vol. 11(4), pages 435-467, 08.
- Robert A Moffitt & Mark Wilhelm, 2000.
"Taxation and the Labor Supply - Decisions of the Affluent,"
Economics Working Paper Archive
414, The Johns Hopkins University,Department of Economics.
- Robert A. Moffitt & Mark Wilhelm, 1998. "Taxation and the Labor Supply: Decisions of the Affluent," NBER Working Papers 6621, National Bureau of Economic Research, Inc.
- Tobias Lindhe & Jan Södersten & Ann �berg, 2004. "Economic Effects of Taxing Different Organizational Forms under the Nordic Dual Income Tax," International Tax and Public Finance, Springer, vol. 11(4), pages 469-485, 08.
- Seppo Kari, 1999. "Dynamic Behaviour of the Firm Under Dual Income Taxation," Research Reports 51, Government Institute for Economic Research Finland (VATT).
- Robin Boadway, 2004. "The Dual Income Tax System - An Overview," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 2(3), pages 03-08, October.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1875. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.