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The Elasticity of Taxable Income of Individuals in Couples

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  • Creedy, John
  • Gemmell, Norman

Abstract

This paper examines the effect on the elasticity of taxable income for individuals in couples, where there is no income splitting for tax purposes but joint decisions are taken regarding taxable incomes. Two approaches are considered. First, the effects of minimising the total tax increase arising from a marginal rate increase are examines. Second, the paper considers the effects of joint utility maximisation.

Suggested Citation

  • Creedy, John & Gemmell, Norman, 2018. "The Elasticity of Taxable Income of Individuals in Couples," Working Paper Series 20831, Victoria University of Wellington, Chair in Public Finance.
    • Handle: RePEc:vuw:vuwcpf:20831
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/20831
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    5. Stephens, Melvin Jr & Ward-Batts, Jennifer, 2004. "The impact of separate taxation on the intra-household allocation of assets: evidence from the UK," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1989-2007, August.
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    8. 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.
    9. Jennifer Ward-Batts, 2008. "Out of the Wallet and into the Purse: Using Micro Data to Test Income Pooling," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 325-351.
    10. John Creedy & Norman Gemmell, 2006. "Modelling Tax Revenue Growth," Books, Edward Elgar Publishing, number 4073.
    11. 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.
    12. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(1), pages 205-229.
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    14. Chiappori, Pierre-André & Donni, Olivier, 2009. "Non-unitary Models of Household Behavior: A Survey of the Literature," IZA Discussion Papers 4603, Institute of Labor Economics (IZA).
    15. John Creedy & Norman Gemmell & Josh Teng, 2018. "Income effects and the elasticity of taxable income," New Zealand Economic Papers, Taylor & Francis Journals, vol. 52(2), pages 185-203, May.
    16. Nada Eissa, 1995. "Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment," NBER Working Papers 5023, National Bureau of Economic Research, Inc.
    17. LaLumia, Sara, 2008. "The effects of joint taxation of married couples on labor supply and non-wage income," Journal of Public Economics, Elsevier, vol. 92(7), pages 1698-1719, July.
    18. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    19. Alexander M. Gelber, 2014. "Taxation and the Earnings of Husbands and Wives: Evidence from Sweden," The Review of Economics and Statistics, MIT Press, vol. 96(2), pages 287-305, May.
    20. Bach, Stefan & Corneo, Giacomo & Steiner, Viktor, 2012. "Optimal top marginal tax rates under income splitting for couples," European Economic Review, Elsevier, vol. 56(6), pages 1055-1069.
    21. Shelly J. Lundberg & Robert A. Pollak & Terence J. Wales, 1997. "Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 463-480.
    22. John Creedy, 2015. "The elasticity of taxable income, welfare changes and optimal tax rates," New Zealand Economic Papers, Taylor & Francis Journals, vol. 49(3), pages 227-248, August.
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    Cited by:

    1. Michaël Sicsic, 2022. "Does labour income react more to income tax or means‐tested benefits reforms?," Fiscal Studies, John Wiley & Sons, vol. 43(3), pages 291-319, September.
    2. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.
    3. Nazila Alinaghi & John Creedy & Norman Gemmell, 2023. "Do couples bunch more? Evidence from partnered and single taxpayers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(4), pages 1137-1184, August.

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    More about this item

    Keywords

    Income taxation; Taxable income; Elasticity of taxable income;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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