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The Elasticity of Taxable Income over the 1980s and 1990s

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  • Giertz, Seth

Abstract

Taxable (and broad) income elasticities are estimated using tax return data from 1979 to 2001. Data from the Continuous Work History Survey (CWHS) yield an estimated taxable income elasticity for the 1990s that is about half the corresponding 1980s estimate. Estimates from the full Statistics of Income, which heavily oversamples high–income filers, generally confirm the CWHS results. More sophisticated income control brings the estimates for the two decades closer together—to 0.40 for the 1980s and 0.26 for the 1990s. Work by Kopczuk (2005) implies that the narrowing of the tax base since 1986 could account for 14 to 29 percent of the remaining difference.

Suggested Citation

  • Giertz, Seth, 2007. "The Elasticity of Taxable Income over the 1980s and 1990s," MPRA Paper 18313, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18313
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    References listed on IDEAS

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    Cited by:

    1. Singleton, Perry, 2011. "The Effect of Taxes on Taxable Earnings: Evidence From the 2001 and Related U.S. Federal Tax Acts," National Tax Journal, National Tax Association, vol. 64(2), pages 323-351, June.
    2. Blomquist, Sören & Selin, Håkan, 2010. "Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 878-889, December.
    3. Heim, Bradley T., 2010. "The responsiveness of self-employment income to tax rate changes," Labour Economics, Elsevier, vol. 17(6), pages 940-950, December.
    4. Henrik Jacobsen Kleven & Esben Anton Schultz, 2011. "Estimating Taxable Income Responses using Danish Tax Reforms," EPRU Working Paper Series 2011-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    5. Alpert, Abby & Powell, David, 2014. "Estimating Intensive and Extensive Tax Responsiveness: Do Older Workers Respond to Income Taxes?," Working Papers 987-1, RAND Corporation.
    6. John Creedy & Norman Gemmell, 2011. "Tax Rates and Revenue Changes: Behavioural and Structural Factors," Treasury Working Paper Series 11/05, New Zealand Treasury.
    7. Blomquist, Sören & Kumar, Anil & Liang, Che-Yuan & Newey, Whitney K., 2014. "Individual Heterogeneity, Nonlinear Budget Sets, and Taxable Income," Working Paper Series, Center for Fiscal Studies 2014:1, Uppsala University, Department of Economics.
    8. Abby Alpert & David Powell, 2014. "Estimating Intensive and Extensive Tax Responsiveness Do Older Workers Respond to Income Taxes?," Working Papers WR-987-1, RAND Corporation.
    9. Miyazaki, Takeshi & Ishida, Ryo, 2016. "Estimating the Elasticity of Taxable Income: Evidence from Top Japanese Taxpayers," MPRA Paper 74623, University Library of Munich, Germany.
    10. John Creedy & Norman Gemmell, 2013. "Measuring revenue responses to tax rate changes in multi-rate income tax systems: behavioural and structural factors," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(6), pages 974-991, December.
    11. Christina D. Romer & David H. Romer, 2014. "The Incentive Effects of Marginal Tax Rates: Evidence from the Interwar Era," American Economic Journal: Economic Policy, American Economic Association, vol. 6(3), pages 242-281, August.
    12. John Deskins & William Fox, 2008. "Measuring Behavioral Responses to the Property Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0816, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. 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.
    14. repec:kap:itaxpf:v:24:y:2017:i:6:d:10.1007_s10797-017-9470-3 is not listed on IDEAS
    15. José Félix Sanz-Sanz & María Arrazola-Vacas & Nuria Rueda-López & Desiderio Romero-Jordán, 2015. "Reported gross income and marginal tax rates: estimation of the behavioural reactions of Spanish taxpayers," Applied Economics, Taylor & Francis Journals, vol. 47(5), pages 466-484, January.
    16. Robert McClelland & Shannon Mok, 2012. "A Review of Recent Research on Labor Supply Elasticities: Working Paper 2012-12," Working Papers 43675, Congressional Budget Office.
    17. Gorry, Aspen & Hassett, Kevin A. & Hubbard, R. Glenn & Mathur, Aparna, 2017. "The response of deferred executive compensation to changes in tax rates," Journal of Public Economics, Elsevier, vol. 151(C), pages 28-40.
    18. Henrik Jacobsen Kleven & Esben Anton Schultz, 2014. "Estimating Taxable Income Responses Using Danish Tax Reforms," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 271-301, November.
    19. Bev Dahlby & Ergete Ferede, 2012. "The effects of tax rate changes on tax bases and the marginal cost of public funds for Canadian provincial governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 844-883, December.
    20. ZHAO Meng (KONISHI Moe), 2017. "Health-Related Income Gaps and the Effectiveness of Redistributive Policies in Japan," Discussion papers 17039, Research Institute of Economy, Trade and Industry (RIETI).
    21. Hakan Yilmazkuday, 2011. "Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy," Working Papers 1106, Florida International University, Department of Economics.
    22. Robert McClelland & Shannon Mok, 2014. "Labor Force Participation Elasticities of Women and Secondary Earners within Married Couples: Working Paper 2014-06," Working Papers 49433, Congressional Budget Office.

    More about this item

    Keywords

    Taxable Income Elasticity; Behavioral Responses to taxation; Efficiency;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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