Discussion Paper Details

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

Author(s): Rocco Enrico Rubolino and Daniel WaldenstrŲm

Publication Date: March 2017

Keyword(s): economic history, Income inequality and taxation

Programme Area(s): Economic History and Public Economics

Abstract: 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.

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Bibliographic Reference

Rubolino, R and WaldenstrŲm, D. 2017. 'Trends and gradients in top tax elasticities: Cross-country evidence, 1900-2014'. London, Centre for Economic Policy Research.