Trends and gradients in top tax elasticities: cross-country evidence, 1900-2014

Publication type

Research Paper

Series Number

10667

Series

IZA Discussion Papers

Authors

Publication date

March 15, 2017

Summary:

We compile data spanning the period 1900–2014 and up to 30 countries to study long-run patterns in the tax elasticity of top incomes. Our results show that top tax elasticities vary tremendously over time; they were medium-to-low before 1950, virtually zero during the postwar era up to 1980 and have thereafter increased to unprecedented levels. We document a strong income gradient in tax response within the top, underlining the importance to study even small top groups separately. Several mechanisms are investigated. Tax-driven income shifting between wage and capital income is important in the very top. Wars, financial crises, and country-specific effects and trends have bearing on top elasticities whereas standard macroeconomic factors and indicators of “real responses” do not.

Subjects

Link

http://ftp.iza.org/dp10667.pdf


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