Are Elasticities of Taxable Income Rising?

Alexander Klemm, Li Liu, Victor Mylonas and Philippe Wingender

No 2018/132, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses a possible explanation for the global downward trend in top personal income tax rates over the last decades: globalization and the related tax evasion and avoidance opportunities could have raised elasticities of taxable income, which would imply lower optimal tax rates. The paper estimates elasticities of taxable income for top income earners using a large sample of economies and years with a common method, allowing an analysis of trends in such elasticities. The paper finds that elasticities do not appear to exhibit any clear pattern over the years. The downward trend in tax rates must have other possible explanations, which are briefly discussed.

Keywords: WP; tax rate; income share; Optimal tax; Elasticity of taxable income; Tax Progressivity; Progressive Taxation; ETI estimate; estimate ETI; tax competition; OECD tax database; tax policy rates database; cross-economy estimate; income tax tax rate; tax purpose; tax rate change; tax schedule; net-of-tax rate; Personal income; Corporate income tax; Personal income tax; Marginal effective tax rate; Income tax systems (search for similar items in EconPapers)
Pages: 22
Date: 2018-06-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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