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Deadweight loss and taxation of earned income: evidence from tax records of the UK self-employed

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  • Laura Blow

    () (Institute for Fiscal Studies and University of Surrey)

  • Ian Preston

    () (Institute for Fiscal Studies and University College London)

Abstract

Responses to changes in marginal income tax rates can be more complex than a simple adjustment in hours worked. Given this, a more inclusive way to assess the deadweight costs of taxes on labour income is to examine the effect of changes in the marginal tax rate on taxable income rather than on labour supply. In this paper we apply a grouping estimator to data from the UK Survey of Personal Incomes so assess the magnitude of taxable income responses of the self employed. Our results point to a modest degree of deadweight loss.

Suggested Citation

  • Laura Blow & Ian Preston, 2002. "Deadweight loss and taxation of earned income: evidence from tax records of the UK self-employed," IFS Working Papers W02/15, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:02/15
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    References listed on IDEAS

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    Cited by:

    1. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
    2. Stuart Adam, 2005. "Measuring the marginal efficiency cost of redistribution in the UK," IFS Working Papers W05/14, Institute for Fiscal Studies.
    3. Kristoffer Berg & Thor O. Thoresen, 2016. "Problematic response margins in the estimation of the elasticity of taxable income," Discussion Papers 851, Statistics Norway, Research Department.
    4. Seng-Eun Choi, 2014. "Is Self-Employment Income More Responsive to Income Tax Rate?," Korean Economic Review, Korean Economic Association, vol. 30, pages 67-84.

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