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Trends and gradients in top tax elasticities: Cross-country evidence, 1900-2014

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  • Rubolino, Enrico
  • Waldenstr�m, Daniel

Abstract

We compile data spanning the period 1900–2014 and up to 30 countries to study long-run patterns in the tax elasticity of top incomes. Our results show that top tax elasticities vary tremendously over time; they were medium-to-low before 1950, virtually zero during the postwar era up to 1980 and have thereafter increased to unprecedented levels. We document a strong income gradient in tax response within the top, underlining the importance to study even small top groups separately. Several mechanisms are investigated. Tax-driven income shifting between wage and capital income is important in the very top. Wars, financial crises, and country-specific effects and trends have bearing on top elasticities whereas standard macroeconomic factors and indicators of “real responses†do not.

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  • Rubolino, Enrico & Waldenstr�m, Daniel, 2017. "Trends and gradients in top tax elasticities: Cross-country evidence, 1900-2014," CEPR Discussion Papers 11935, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11935
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    Cited by:

    1. Enrico Rubolino & Daniel Waldenström, 2020. "Tax progressivity and top incomes evidence from tax reforms," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(3), pages 261-289, September.
    2. Julia Tanndal & Daniel Waldenström, 2018. "Does Financial Deregulation Boost Top Incomes? Evidence from the Big Bang," Economica, London School of Economics and Political Science, vol. 85(338), pages 232-265, April.
    3. El Herradi, Mehdi & Leroy, Aurélien, 2020. "Do rising top incomes fuel credit expansion?," Economics Letters, Elsevier, vol. 196(C).
    4. Suresh Nallareddy & Ethan Rouen & Juan Carlos Suárez Serrato, 2022. "Do Corporate Tax Cuts Increase Income Inequality?," Tax Policy and the Economy, University of Chicago Press, vol. 36(1), pages 35-91.
    5. David R. Agrawal & Dirk Foremny, 2019. "Relocation of the Rich: Migration in Response to Top Tax Rate Changes from Spanish Reforms," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 214-232, May.
    6. Bartels, Charlotte & Waldenström, Daniel, 2021. "Inequality and top incomes," GLO Discussion Paper Series 959, Global Labor Organization (GLO).

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    More about this item

    Keywords

    economic history; Income inequality; taxation;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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