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Taxable Income Responses to Tax Changes - A Panel Analysis of the 1990/91 Swedish Reform

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  • Selén, Jan

    (Trade Union Institute for Economic Research)

Abstract

The elasticity of taxable income indicates the effects on income from a change in the marginal tax rate. In a number of studies on U.S. data rather strong effects have been found, although estimates seem lower in more recent papers. Studies based on data from other countries are only a few and indicate lower effects. A difference-in-differences approach utilising differences in tax changes is the standard approach for analysis. Here a large Swedish tax reform is employed. Estimated effects of a tax cut are modest, in the interval 0.2 to 0.4 at the most. Problems of income variables and income groups for the analysis are extensively examined. According to an extended model there is a positive income effect of the tax change, implying a difference between the compensated and the uncompensated elasticity, contrary to earlier results for the U. S.

Suggested Citation

  • Selén, Jan, 2002. "Taxable Income Responses to Tax Changes - A Panel Analysis of the 1990/91 Swedish Reform," Working Paper Series 177, Trade Union Institute for Economic Research.
    • Handle: RePEc:hhs:fiefwp:0177
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    References listed on IDEAS

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    Cited by:

    1. 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.

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    More about this item

    Keywords

    Tax reform; taxable income elasticity; difference in differences;
    All these keywords.

    JEL classification:

    • 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

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