Behavioural responses to a wealth tax

Arun Advani and Hannah Tarrant

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In this paper, we review the existing empirical evidence on how individuals respond to the incentives created by a net wealth tax. Variation in the overall magnitude of behavioural responses is substantial: estimates of the elasticity of taxable wealth vary by a factor of 800. We explore three key reasons for this variation: tax design, context and methodology. We then discuss what is known about the importance of individual margins of response and how these interact with policy choices. Finally, we use our analysis to systematically narrow down and reconcile the range of elasticity estimates. We argue that a well-designed wealth tax would reduce the tax base by 7–17 per cent if levied at a tax rate of 1 per cent.

Keywords: behavioural responses; efficiency; tax elasticities; wealth tax; ES/L011719/1; ES/V012657/1; International Inequalities Institute AFSEE COVID‐19 fund (search for similar items in EconPapers)
JEL-codes: D14 H21 H26 H31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021-10-25
New Economics Papers: this item is included in nep-cwa and nep-pbe
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Citations: View citations in EconPapers (20)

Published in Fiscal Studies, 25, October, 2021, 42(3-4), pp. 509 - 537. ISSN: 0143-5671

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http://eprints.lse.ac.uk/112695/ Open access version. (application/pdf)

Related works:
Journal Article: Behavioural responses to a wealth tax (2021)
Working Paper: Behavioural responses to a wealth tax (2021)
Working Paper: Behavioural responses to a wealth tax (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:112695

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