Saturday, November 9, 2013
:
8:40 AM
3016 Adams (Washington Marriott)
*Names in bold indicate Presenter
The elasticity of taxable income (ETI) with respect to the marginal net-of-tax rate is an estimate of the aggregate response to tax rate changes. It is estimated without attributing credit or blame to avoidance, evasion, or changes in economic growth. Historical ETI estimates in the public finance literature often rely on questionable assumptions about income dynamics. A provision in the Revenue Act of 1924 for publicity of income tax returns allowed major newspapers to run lists of names, addresses, and tax payments in their pages. From these records, I constructed a dataset of very high income taxpayers. Over 10,000 individuals can be easily matched between the two years. In addition, the Revenue Act of 1924 sharply cut marginal tax rates. These changes can be used to estimate the ETI without distribution or rank preservation assumptions. Preliminary estimates indicate a positive ETI around 0.3, consistent with previous research.
