IMF Working Papers

Are Elasticities of Taxable Income Rising?

By Alexander D Klemm, Li Liu, Victor Mylonas, Philippe Wingender

June 13, 2018

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Alexander D Klemm, Li Liu, Victor Mylonas, and Philippe Wingender. Are Elasticities of Taxable Income Rising?, (USA: International Monetary Fund, 2018) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper assesses a possible explanation for the global downward trend in top personal income tax rates over the last decades: globalization and the related tax evasion and avoidance opportunities could have raised elasticities of taxable income, which would imply lower optimal tax rates. The paper estimates elasticities of taxable income for top income earners using a large sample of economies and years with a common method, allowing an analysis of trends in such elasticities. The paper finds that elasticities do not appear to exhibit any clear pattern over the years. The downward trend in tax rates must have other possible explanations, which are briefly discussed.

Subject: Corporate income tax, Income tax systems, Marginal effective tax rate, National accounts, Personal income, Personal income tax, Tax policy, Taxes

Keywords: Corporate income tax, Cross-economy estimate, Elasticity of taxable income, Estimate ETI, ETI estimate, Income share, Income tax systems, Income tax tax rate, Marginal effective tax rate, Net-of-tax rate, OECD tax database, Optimal tax, Personal income, Personal income tax, Progressive Taxation, Tax competition, Tax policy rates database, Tax Progressivity, Tax purpose, Tax rate, Tax rate change, Tax schedule, WP

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/132

  • Stock No:

    WPIEA2018132

  • ISBN:

    9781484361566

  • ISSN:

    1018-5941

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