Journal of Political Economy Vol. 103 No. 3 1995
The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act
open access
Abstract
This paper uses a Treasury Department panel of more than 4,000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates based on a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform. The analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply. The evidence shows an elasticity of taxable income with respect to the marginal net-of-tax rate that is at least one and that could be substantially higher. The implications for recent tax rate changes are discussed.
- DOI
- 10.1086/261994
- Volume
- 103
- Issue
- 3
- Pages
- 551-572
- Language
- en
- Sources
- crossref openalex