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Tax Progressivity and Top Incomes: Evidence from Tax Reforms


  • Rubolino, Enrico

    (Uppsala University)

  • Waldenström, Daniel

    () (Paris School of Economics)


We study the link between tax progressivity and top income shares. Using variation from large-scale Western tax reforms in the 1980s and 1990s and the novel synthetic control method, we find large and lasting boosting impacts on top income shares from the progressivity reductions. Effects are largest in the very top groups while earners in the bottom half of the top decile were almost unaffected by the reforms. Cuts in top marginal tax rates account for most of this outcome whereas reduced overall progressivity contributed less. Searching for mechanisms, real income responses as measured by growth in aggregate GDP per capita, registered patents and tax revenues were unaffected by the reforms. By contrast, tax avoidance behavior related to the management of capital incomes in the very income top appears to lie behind the observed effects.

Suggested Citation

  • Rubolino, Enrico & Waldenström, Daniel, 2017. "Tax Progressivity and Top Incomes: Evidence from Tax Reforms," IZA Discussion Papers 10666, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10666

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    References listed on IDEAS

    1. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    2. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014, March.
    3. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
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    More about this item


    taxation; income inequality; tax policy;

    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
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories

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