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Taxation and Top Incomes in Canada

Author

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  • Kevin Milligan
  • Michael Smart

Abstract

We estimate the elasticity of reported income with respect to tax rates for high earners using subnational variation across Canadian provinces. We argue this allows for better identification of tax elasticities than the existing literature. We find that elasticities of reported income at the provincial level are large for incomes in the top one percent, but small for lower earners. There are strong indications that the response happens both through earned and capital income. While our estimated elasticities are large, changes in tax rates cannot explain much of the overall long-run trend of higher income concentration in Canada.

Suggested Citation

  • Kevin Milligan & Michael Smart, 2014. "Taxation and Top Incomes in Canada," NBER Working Papers 20489, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20489
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    References listed on IDEAS

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    1. Atkinson, Tony & Leigh, Andrew, 2010. "The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century," IZA Discussion Papers 4937, Institute for the Study of Labor (IZA).
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    Cited by:

    1. Liam C. Malloy, 2016. "Do Lower Top Marginal Tax Rates Slow the Income Growth of Workers?," LABOUR, CEIS, vol. 30(1), pages 61-87, March.
    2. repec:jid:journl:y:2017:v:25:i:1:p:1-25 is not listed on IDEAS

    More about this item

    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

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