DP11935 Trends and gradients in top tax elasticities: Cross-country evidence, 1900-2014
|Author(s):||Enrico Rubolino, Daniel Waldenström|
|Publication Date:||March 2017|
|Keyword(s):||economic history, Income inequality, taxation|
|JEL(s):||D31, H21, H24, H26, N40|
|Programme Areas:||Public Economics, Economic History|
|Link to this Page:||www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11935|
We compile data spanning the period 1900â€“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 â€śreal responsesâ€ť do not.