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Trends and Gradients in Top Tax Elasticities: Cross-country Evidence, 1900–2014

Author

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  • Rubolino, Enrico

    (Uppsala University)

  • Waldenström, Daniel

    () (Research Institute of Industrial Economics (IFN))

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.

Suggested Citation

  • Rubolino, Enrico & Waldenström, Daniel, 2017. "Trends and Gradients in Top Tax Elasticities: Cross-country Evidence, 1900–2014," Working Paper Series 1160, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1160
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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. Enrico Rubolino & Daniel Waldenström, 0. "Tax progressivity and top incomes evidence from tax reforms," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 0, pages 1-29.
    3. 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.
    4. El Herradi, Mehdi & Leroy, Aurélien, 2020. "Do rising top incomes fuel credit expansion?," Economics Letters, Elsevier, vol. 196(C).

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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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